The long-awaited consolidated tape for Europe is finally on track—or so it seems. But with the latest iteration a far cry from initial plans, just who is the tape actually going to help—and perhaps the biggest question of all, how will it make money? We talk to the key players behind the current bids to learn just how realistic a CT really is, both logistically and financially.
Who’s bidding?
The tender for European consolidated tapes (CT) is up for grabs next year, with a decision on bonds scheduled for 25 July 2025 and equities following a day later on the 26 July. While there’s a lot of conversation around the tapes, it’s still not clear exactly who will be bidding. EuroCTP, a consortium of European exchanges, is all set to bid for equities—but they don’t yet have a technology partner.
Eglantine Desautel, EuroCTP CEO, confirmed to BEST EXECUTION that although the group’s bid will be for EU equities, they’re not entirely ruling out involvement in UK tapes either.
From the other side of the market, user consortium Adamantia (which counts 10+ buy-side and sell-side firms among its members) is also expected to throw its hat in the ring. Although its participation has not yet been confirmed, the firm recently ran a feasibility study to determine the commercial viability of bidding for the tape and found that there is still demand from the buy and sell side.
“Initially we looked at both equities and bonds. We decided to focus on equity because there were already several credible players engaged for the fixed income tape,” the company’s co-founder Antoine Pertriaux shared.
“We’re progressing on the equity CTP initiative,” he continued. “At the moment, we’re still working on various aspects—including the selection of a technology partner to build the solution. We need to finalise all of that before we can make a decision on bidding.”
Technology provider FINBOURNE, formerly tech partner to the now defunct Cassette consortium of MarketAxess, TradeWeb and Bloomberg, is also a contender – with a focus on bonds. “With equities, we would probably position ourselves as a third-party, core infrastructure provider rather than the CT provider,” revealed Neil Ryan, consultant at FINBOURNE Technology.
Show me the money
There are still a lot of questions surrounding the tape, perhaps the most prevalent of which is how providers will make any money. There is a payment structure in place to cover costs. “The consolidated tape… is well positioned to succeed given that the legislation includes mandatory contribution from trading venues,” stated the European Fund and Asset Management Association (EFAMA). But will this be enough?
The base offering is expected to be free for many (certainly for the retail market) and cheap for all, meaning that firms are considering what they can add to their service to turn a profit.
“The UK bond tape is not going to be a hugely profitable enterprise,” said FINBOURNE’s Ryan, reflecting on the FCA’s current position (following recent discussions) that it is unlikely to allow the provision of value-added services on top of the tapes. “That’s why there aren’t that many contenders for it.”
Across the channel, ESMA has not yet released a verdict on whether providers can charge extra for add-ons to the basic tape – although bidders such as EuroCPT are already exploring ways in which they can bolt on extra (and of course, chargeable) elements.
But from a buy-side point of view, add-ons and extras aren’t necessarily appealing. There are already a wide range of data offerings on the market from a wide range of data companies—why would clients choose to pay more?
Speaking at an ETF event last year Tilman Lueder, head of securities markets at the European Commission, raised a similar point. “This is the first legislative process in a long time that is in reality a commercial negotiation between two sides that are not directly at the table,” he said. “It is all about the money.”
What will make the EU CT stand out is its role as a reference point, Desautel believes. Providers will be under “a high level of responsibility” to ensure that the data quality for this benchmark is of very high quality, but will ultimately set it apart from others in the market.
While the primary focus for the CT is real-time data, Desautel emphasised the fact that offering historical data as an add-on service would help to generate profit for providers. While real-time data is the priority, adding historical data is a potential add-on route to take. “There is a clear request to access historical data from the CT but there needs to be further interactions for the rest. It’s a work in progress, but something that we’re assessing.” The historical data option is really obvious, but we need to fine-tune for the rest.”
The use of historical data is a point of contention in the tape debate, as it would put providers in competition with existing data companies. She anticipates two waves of competition in the space: the first between candidates vying for the tapes and then, later down the line, between data solutions and the CTs.
“We know from our clients that there is a need for accurate and consistent analytics across the fragmented pan European landscape (and globally). As the market evolves (e.g. more venues equals greater complexity) we see the demand increasing,” said Mark Montgomery, head of strategy and business development at data provider big xyt.
“Our team maintains a full history as clients need to see the application of a consistent methodology so that trends can be more easily identified. That history is certainly valued by clients, as they are prepared to pay for access to it.”
Desautel shared that EuroCTP’s decision on how they’ll approach this issue is dependent on ESMA’s decision, and emphasised the need to speak to the community and determine their real needs. “It’s too early to give a view on the services to be delivered by the CT,” she said.
Connectivity is another issue set to raise costs. In order to consolidate dataflows, either exchanges will have to comply to a standard format or the CTP will have to consolidate variable formats into the tape. If the former option is taken then there will be an impact on time to market, with providers having to wait on exchanges to format their data accordingly. On the other hand, the second option will saddle them with another cost burden.
“Who is going to support these costs?” asked Pertriaux. “ESMA will need to take a position on that, taking into account the costs but also the advantages and drawbacks for each solution.
Looking ahead
“I think the CTP is going to be an evolving tool,” stated FINBOURNE’s Ryan, sharing his expectations for the tapes’ future. “It will be a catalyst. A lot of people are thinking about the box that it’s going to fit into, but it’s going to be a vehicle that can evolve with the market and can be used in various different ways.”
ESMA’s timeline for the CT project dedicates 2024 to the “preparation of technical standards and procedures”, with the first selection for bond CTP launch slated for Q1 2025.
The association has already held two workshops this year, the first held in February for potential applicants and the second, taking place on March 14th, for market participants. These will run alongside a detailed consultation, expected to begin in May, and will allow the association to garner an overall picture of viewpoints across the industry.
Some very low design technicalities that could be left to the market community, Desautel suggested, allowing providers to begin to develop their offerings before the consultation phase ends. She also highlighted the ecological impact that will come with increased data storage requirements, and the need to consider the carbon footprint of offshore financial markets as the development process continues.
Retail reality
There’s long been a focus on improving retail volumes and engaging the retail investor in the markets. However, CT consultations and discussions seem to be leaving the entire group off of the invitation list. “The policy makers intend to get this to the retail market, they’re saying ‘we want the pool to be bigger, we want more retail investment’,” Ryan said, “but there’s no real retail representation at a lot of these [meetings].”
In order to reach the retail market, CTs will face yet another layer of competition. Rather than being up against similar products, they’ll be vying for retail attention against products directly catered to that market – in particular, the crypto tidal wave. Can an equities (or bond) tape really capture the retail market imagination in a way that will turn the tide for Europe’s dwindling capital markets?
Failure to launch
Whichever provider is successful in their bid for the tape will be responsible for a five-year term. The tape’s success in those initial five years is crucial—if the provider decides it’s not financially viable and pulls out, the odds are that no one else will want to take over. For more than two decades, market participants and regulatory bodies have pushed for a consolidated tape in Europe. Failure, at this point, would be demoralising to say the least.
“Given the strong request for an EU consolidated tape, we will have to find a solution to make it financially viable and be able to pursue beyond the initial term,” urged Desautel. She stressed the need for providers to diversify, and again advocated for the ability to offer additional services to the tape. If market participants’ needs and appetites are not yet being met, providers must find different solutions, she added.
Ryan predicted that if the tape does fail, “there’s not one party that can be blamed. It [would be] a global failure.”
ESMA’s expected timeline currently gives Q4 2025 as the expected deadline for the authorisation of the bond CPT. With less than two years to go, a number of major issues still need to be addressed—whether the tape will last beyond the initial five-year term being one of the most pressing.
And that, it seems, will all come down to money. Plus ça change, plus c’est la même chose.
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