AFME says Consolidated Tape must strike right balance
08 October 2021
From AFME’s members’ perspective the use case is clear: in equities markets, we need a real-time consolidated tape in Europe that provides access for all investors to help build deeper and more open capital markets in Europe.
Ahead of the MIFIR Review, the Association for Financial Markets in Europe (AFME) has today published its position on a Consolidated Tape in Europe. Adam Farkas, Chief Executive at AFME, said:
“As the MiFIR Review fast approaches, all corners of the
financial markets industry are articulating their needs for a
consolidated tape in Europe....
“An equity real-time consolidated tape would cut costs and
democratise access to all retail investors across the EU, contributing
to the creation of a truly pan-European market. This technological
solution would help advance the objectives of the Capital Markets Union,
while ensuring that interconnected national ecosystems continue to
serve local communities.
“This is also why having diverse market structure is vital,
providing investor choice and competitiveness. The establishment of a
consolidated tape should not in any way interfere with the existing
market structure in the EU – policy makers need to protect market
diversity which is the backbone of healthy, resilient, and competitive
European financial markets. In this respect, a consolidated
tape would also aid with reducing the market power of trading venues
when selling real-time, extremely expensive, post-trade data.
“Now is the time to address Europe’s lack of competitiveness with
regards to having a single price comparison tool for investors across
Europe. However, it will be important to get the balance right, so that
it makes sense for investors at the heart of the tape, without damaging market structure.”
In order for a Consolidated Tape (CT) to work, AFME members recommend:
- The equity CT must be real-time – there is no business case for a delayed tape,
given that the legal framework already requires the provision of market
data, free of charge, 15 minutes after publication. Conversely, an
equity real time tape offers a number of benefits.
- Data quality should be addressed alongside the development of a CT
– the implementation of the post-trade transparency regimes under MiFID
II identified a number of data quality issues relating to SI and OTC
post-trade reporting, particularly the treatment of
non-addressable/non-price forming trades which should be excluded for
the purposes of post-trade transparency.
- The bond CT needs to ensure committed liquidity providers are not exposed to undue risk by
not publishing post-trade details until after the deferral period has
expired. MiFID II introduced deferrals because it was recognised that
real time post-trade transparency can expose committed liquidity
providers to undue risks, especially when trading in illiquid
instruments or transactions above a certain size, hence diminishing the
liquidity available to corporates and investors.
- The establishment of a CT must not impact the well-established market structure framework in Europe
- The cost of accessing the CT should be as low as possible in order to democratise market data within Europe and ensure healthy, competitive markets
- Mandatory data contribution to the CT – trading
venues, APAs and systematic internalisers (SIs) should be required to
provide market data, free of charge, to the CTP. Without this approach,
costs will ultimately be passed on end users and this could limit the
number of firms consuming data, reducing the commercial incentive for
the emergence of a single consolidated tape provider.
- No mandatory consumption of the CT – market
participants should not be forced to consume the CT as, in many cases,
this will mean that firms are forced to pay for the same data via direct
feeds and via the CT (i.e. paying for the same data twice). Instead, a
CT should be appropriately constructed so that it provides an offering
that is economically attractive to market data users. This will ensure
the continued success of a CT.
- There should be a single CTP for each asset class–
without a single provider, the risk of multiple providers emerging with
potentially different or overlapping product scopes may defeat the
purpose of having a truly consolidated view of the market and increase
costs to consumers.
AFME
© AFME
