The Association for Financial Markets in Europe (AFME), German Investment Funds Association (BVI), Cboe Europe and the European Fund and Asset Management Association (EFAMA) have jointly published a position paper setting out 11 key principles neededf for the successful creation of an EU equity consolidated tape (CT).
While the trade groups support many aspects of the European Commission’s blueprint for a CT across European markets, as set out as part of MiFIR in 2021, they believe the EU needs to be more ambitious with its proposals to realise the full benefits of this crucial initiative.
They include that the CT infrastructure does not need to be the most expensive low-latency infrastructure and those firms engaging in latency sensitive activities will, in all likelihood, continue to source their market data via direct feeds.
In addition, revenue sharing model should include all contributors and that there should be one single CT provider, subject to appropriate governance and regulatory oversight.
There should also be mandatory contribution of pre-trade and post-trade data, to overcome the complexities and variances of licensing data from multiple sources and ensure the CT is viable business opportunity.
Moreover, commercial viability requires real-time, pre-trade data while engineering of the CT and its feeds should be simplified.
CT content should be designed to cover the full trading day, and to improve resilience.
A CT does not require a change to best execution rules. Brokers should continue to be allowed to have discretion about which venues to access when trading for customers. However, ensuring that consumers are well informed about the availability of better prices may, over time, lead to commercial demand for brokers to enhance their access to liquidity
The CT should be priced to succeed and sold with a simple, single market data licensing framework covering a variety of use cases.
Last but not least, they note there should be no mandatory consumption of a CT, given that some firms will source direct feeds due to the need for lower-latency data, and hence would have no need for the CT for this purpose.
“Until now, the development of a consolidated tape has been a slow burn in the EU,” said Adam Farkas, chief executive of AFME. “To ensure the EU can compete as a global player, it needs to implement this vital price comparison tool, which will provide investors with a holistic view of investment opportunities across Europe, instead of limiting themselves to their home markets.
However, in order for this to be achieved, the tape must be appropriately constructed. This cross-industry paper sets out the key principles for establishing a consolidated tape which can be both commercially viable and of genuine use to EU investors and market participants.”
Natan Tiefenbrun, president of Cboe Europe, added, “These principles would help ensure the EU achieves a commercially viable consolidated tape, dramatically improving the accessibility of EU market data to investors of all types.
It would help achieve an integrated and more resilient EU market and, crucially, encourage greater retail participation in EU equity markets via improved data access and enhanced investor protections.”
Tanguy van de Werve, director general of EFAMA, noted, “The signatories to these Principles represent a broad cross-section of capital market participants in Europe. It highlights the importance of delivering a consolidated tape for equities in what is a global trading marketplace.
The ability to access a single source of consolidated data is paramount for continuing to attract global investment flows, for enhancing capital market participation in Europe, and for building investor confidence through transparency on trade data.”
©Markets Media Europe 2022
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