Exchanges across Europe recently changed from opposing the creation of a consolidated tape to offering to launch and operate the infrastructure, however, it bears considering whether their revenue models are under threat if their vision for the tape loses out to what buy and sell-side participants are demanding.
Last month, some 14 exchanges including Euronext, Deutsche Boerse, SIX Swiss and Nasdaq went from outright resisting the formation of a consolidated tape to suggesting they would put in a joint bid to operate the data centralising framework in accordance with the European Council’s proposal for a post-trade-only tape last December.
Unfortunately, the prospect of a consolidated tape not also featuring pre-trade data has failed to convince those not within the exchange joint venture.
Natan Tiefenbrun, president of Cboe Europe, said the European Council’s proposal would be “like driving with the rear-view mirror” and post-trade data already on offer is not bought. Such a consolidated tape “does not meet investors’ needs”, he added.
Echoing his thoughts, Susan Yavari, senior regulatory policy adviser at the European Funds and Asset Management Association (EFAMA), added the exchanges’ endorsement of such a tape is a “protectionist and backward-looking” to “brick wall” what the market is demanding and must be viewed “with a heavy dose of scepticism”.
ETF Stream understands individual exchanges are lobbying countries’ ministers of finance to opt for a post-trade consolidated tape that will have no customers in order to protect their current data propositions, with the understanding there will not be the political appetite to repeat the process of building the tape from scratch.
However, should exchanges fail to sway the trialogue process set to begin on 18 April, then they may have to contend with a tape based on the European Parliament’s more recently published position, which advocates for pre and post-trade data.
While having a centralised feed of all disseminated pricing and trades would threaten usage of exchanges’ individual data feeds, Yavari argued exchanges stand to benefit if such a tape is realised and operated by the JV.
“A consolidated tape would grow the trading pie in Europe and actually the incumbent exchanges stand to benefit hugely from keeping more of the European investment within Europe and would attract more global investment,” Yavari said.
“There is a major missing pillar of our infrastructure when global and even European investors cannot find a single source of liquidity and pricing data – and also we do have a data cost issue in Europe that we have been vocal about and the tape would go some way to resolving that.”
While exchanges have reservations about providing a consolidated tape at cost with a small profit margin, operating the entire bond, equity and ETF liquidity picture for a continent whose market would stand to grow as a result could benefit the JV in the long-term.
FCA delays its sustainability regulation
After two delays with Europe’s flagship regulation for categorising products marketed as sustainable, the Financial Conduct Authority (FCA) followed suit this week by announcing it would delay the implementation of its Sustainable Disclosure Regulation (SDR).
The news followed consultation feedback and will see policy changes pushed from Q2 to Q3 as the UK regulator looks to refine the criteria for products fitting into each SDR categorisation.
The FCA added it is considering its approach to marketing restrictions and will ease some of the rules around which funds can be labelled sustainable.
The questions for investors will be to what extent the amended rules align with the EU’s Sustainable Finance Disclosure Regulation (SFDR) and whether, like SFDR, the easing of phase one rules means a secondary level of implementation will be needed to allay fears of greenwashing.
A sudden Europe closure spree
An alignment in closures this week saw Amundi and Invesco take the axe to ETFs offering factor and size-tilted exposures on European equity.
On Tuesday, Amundi shut three ETFs including a multi smart allocation scientific beta and multi-factor market neutral Europe ETF alongside a vanilla Europe ex UK strategy.
A day later, Invesco followed suit with the closure of its STOXX Europe small and mid-cap ETFs, along with an MSCI Europe value and Goldman Sachs world equity factor products.
These terminations were joined by DWS’s decision to shutter its European credit default swap (CDS) ETF despite the product amassing €75m assets under management (AUM).
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