Industry Updates

European Commission outlines plans to introduce consolidated tape

EFAMA said data costs are still an issue

Theo Andrew

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The European Commission is ramping up plans to introduce a consolidated tape to the European market, the long-awaited reform that will deliver data on stock trading “as close to real-time as technically possible”.

In a proposal published yesterday, the Commission said the introduction of a consolidated tape would improve price transparency and competition across Europe’s fragmented trading venues, empowering more retail and smaller-scale investors to invest.

It is part of a wider reform programme by the EU to establish a capital markets union that can rival the likes London and New York.

The move is considered crucial to the next stage of ETF growth across the region, highlighting their unique liquidity and transparency features as well as a liquid and secure investment vehicle.

The lack of 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, while concerns around implementation have caused delays to the process.

However, the Commission said its introduction would help establish a high level of consumer protection for EU citizens while giving them an increased range of investment opportunities.

The Commission said the tape was of particular importance for corporate bond issuances as it looks to improve the liquidity of secondary trading in euro-denominated debt instruments.

As part of the move, exchanges across Europe would be required to send data to a newly created consolidated tape provider which would then publicise the data using “identical tags and formats”.

There will be one consolidated tape provider created for each asset class, including ETFs.

According to the European Fund and Asset Management Association (EFAMA), the provider will be mandated to deliver the trading data in seconds for ETFs and equities. This time lapse in data can be critical for investors, due to the value distortion of the trade, and particularly in periods of high volatility such as March 2020.

EFAMA welcomed the news stating the benefits are “far broader than the asset management industry’s specific needs”.

Tanguy van de Wurve, director general of EFAMA, added: “The proposal is broad, comprehensive and well-thought-out. 

“We believe that it provides a solid basis for the launch of a meaningful consolidated tape in the not-too-distant-future, if the ‘minimum revenue targets’ foreseen for the exchanges remain reasonable and deliver an affordable tape.”

However, the fund trade body said issues remained around “onerous and complex” license agreements with data providers that do not address the problem of “ever increasing prices charged by exchanges”.

Susan Yavari, regulatory policy advisor at EFAMA added: “Even with a consolidated tape the issue of excessive data costs for asset managers remains.

“A not improbable scenario would have asset managers facing even greater costs with the current proposal by paying for a consolidated tape alongside costly proprietary data feeds for which the tape is not a substitute.”

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