The European Union wants to establish up-to-the-minute price feeds for various asset classes traded across the region, including stocks and bonds.
It sees these so-called consolidated tapes as crucial to efforts to harmonize, modernize and even democratize the bloc’s capital markets. While the concept has broad support, implementation of the tapes has proved painfully slow as the industry tussles over the underlying nuts and bolts.
1. What is a consolidated trading tape?
It’s technology that collates information about the price, size and timing of trades happening across multiple trading venues, and spits them out in a centralized, real-time feed. This can include either pre-trade or post-trade data, or both. The EU wants to put tapes in place for shares, exchange-traded funds (ETFs), bonds and derivatives, with the aim of improving the quality and transparency of data for investors.
2. Do they already exist elsewhere?
Yes, the US and Canada have had consolidated tapes for years, though their usefulness as a blueprint is limited given the complexities of Europe’s market structure. The UK is working on its own regulatory framework, due to be in place by 2024, to help establish a tape.
3. What are the advantages?
The biggest selling point is better transparency, making it easier for investors of all stripes to access information and determine whether they obtained the best price for their trade (known as best execution). The European Commission, the EU’s executive arm, also argues that it will make the region’s capital markets more attractive, both domestically and among international investors, thanks to greater efficiencies and data quality at a pan-European level...
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