Consolidated tape: UK has opportunity to lead in Europe

Lack of venue attribution is an issue for the EU's consolidated tape agreement

Tom Eckett

City of London UK

Market participants have been left disappointed by the lack of venue attribution included in the European Union’s consolidated tape agreement, an issue the UK has an opportunity to address in its version.

After months of negotiations, the European Council announced last week it reached an agreement with the European Parliament to establish a consolidated tape for equities and ETFs that includes real-time pre- and post-trade data.

A consolidated tape is viewed as essential if the EU wants to strengthen its Capital Markets Union (CMU) by providing investors with access to market data from all trading venues in one place.

Despite the inclusion of real-time pre-trade data, market participants warned the decision to keep the prices anonymous will reduce the impact of a consolidated tape.

“It was announced this week that the EU consolidated tape will include pre- and post-trade transparency, something that is desperately needed in Europe,” Jim Goldie, head of EMEA ETF capital markets at Invesco, said.

“However, it would have been great to see the EU consolidated tape go one step further to include venue attribution, which would have maximised the utility of the tape.

Adam Farkas, CEO of the Association for Financial Markets in Europe (AFME), said this was an opportunity to reduce costs of market data and create a single window to the EU’s equity market.

“AFME in particular regrets that the determination to create an ambitious, real-time equity consolidated tape with sufficient pre-trade information has been lost through the negotiations,” he added.

This week, the Financial Conduct Authority (FCA) kicked-off its process of creating a consolidated tape as part of its plans to increase the competitiveness of the UK market.

The FCA is planning to establish a live consolidated tape for bonds by 2024 while plans for an equities tape are currently “less developed”.

As with the EU’s consolidated tape, it is crucial the regulator ensures ETFs and real-time pre-trade data are included in the equities version.

“The equities consolidated tape will include data from different types of instruments including shares, ETFs and potentially ETCs and ETNs,” the UK watchdog said.

Transparency around where the trades are being executed is less of an issue for the UK market, however, remains an important part of the jigsaw if the FCA wants to ensure a consolidated tape has the desired impact.

“This is hopefully something we will see addressed by the UK consolidated tape proposals, as venue attribution is incredibly important to provide transparency to investors around which venues are displaying best execution at a given point in time,” Goldie continued.

“The added transparency a consolidated tape will bring to the UK can only contribute to more robust capital markets via improved transaction cost analysis. This will help to document best execution, enhance market surveillance, and improve liquidity risk management and portfolio valuation, all of which adds to investor protection.”

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