As part of its response to the European Commission’s consultation on the review of MiFID II, EFAMA said the absence of a consolidated tape being introduced constituted “a barrier to transparency” under the ‘reasonable commercial costs’ principle.
The body highlighted three key reasons why a consolidated tape had yet to be brought in including the reduced willingness to invest in the infrastructure due to the increase in data costs, the absence of actual incentives and the opposition of data vendors.
EFAMA stressed the consolidated tape should be operated by ESMA which would use an infrastructure developed by an external provider selected via a tender in order to avoid conflicts of interest and ensure fair competition.
EFAMA said in a statement: “Properly enforced, this requirement could lead to buy-side market participants benefitting from better market data license terms and conditions as well as improved cost transparency and eventually fairer pricing.
“Giving access to a unique source of data would reduce reporting errors, avoid duplication of data feeds, and provide the necessary transparency.”
The lack of a consolidated tape has been a key issue for the European ETF ecosystem as investors are currently unable to see the true liquidity of a product.
Under MiFID II, steps were taken to improve this visibility by introducing requirements for over-the-counter (OTC) trading to be reported for the first time.
Subsequently in 2018, Bloomberg teamed-up with issuers to launch an ETF Aggregate Volume field, which is estimated to cover around 85% of the market.
However, investors are still unable to see total trading volumes for ETFs in one place highlighting why a consolidated tape is so important.
EFAMA continued: “The European ETF industry has benefited from the execution transparency delivered through MiFID II by enabling market participants and sophisticated investors to see the volume of ETF trading that occurs daily.
“There do remain opportunities for further strengthening of the ETF ecosystem via the appointment of a regulated consolidated tape provider (CTP) who would aggregate and disseminate trade reporting to all venues and clients with limited delays, including for ETF.
“This reinforces the need for a consolidated tape across fixed income and equity markets.”
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