As the EU Continues to Debate a Consolidated Tape for Equities, AFME Backs Commission on Real-Time Data

The Association for Financial Markets in Europe (AFME) has backed European Commission plans for a real time consolidated tape on equities and debt trades throughout Europe. An issue discussed for at least a decade, the EU lacks a single set of exchange-listed data, such as price and volume information, that is disseminated to investors, unlike in the US.

As the EU continues to roll out its vision for a single Capital Markets Union, the lack of a consolidated system is seen as an obstacle to creating a more reliable view of liquidity across the EU, with arguments that such a system could boost liquidity. Accordingly the AFME also argues that issues of data quality also need to be addressed alongside the development of a consolidated tape, with the implementation of the post-trade transparency regimes under MiFID II having identified a number of data quality issues relating to SI and OTC post-trade reporting.

It has further argued in a position paper that:

* a bond CT should ensure committed liquidity providers are not exposed to undue risk by not being required to publish post-trade details until after the deferral period has expired;
* there is a need for the cost of accessing the CT to be as low as possible;
* trading venues, APAs and systematic internalisers (SIs) should be required to provide market data free of charge. In the absence of being required to contribute, costs would ultimately be passed onto 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;
* even so, market participants should not be forced to use the consolidated tape as this will mean that firms are forced to pay for the same data via direct feeds and via the tape;
* there should be a single CT provider for each asset class because without a single provider where there is a risk of multiple providers emerging with potentially different or overlapping product scopes may defeat the purpose of having a consolidated market view.

The argument for real-time consolidated tapes is in line with the Commission’s view but goes against that which has been argued by European exchanges. A study by management consultancy Oliver Wyman and commissioned for the Federation of European Securities Exchanges (FESE) last month recommended a 15-minute delay to trades information on equities and related ETFs. 

The report argued that a post-trade 15-minute delay was most appropriate “taking into account that market structure imperfections need to be rectified and that the introduction of a CT will require significant initial efforts from all market participants”. 

The push for a consolidated tape has been debated in Europe for many years. The core challenge behind the lack of a single tape is the diversity and fragmentation among EU member states. It would bring the EU market in line with its counterparts in the US where through the consolidated tape the major exchanges, including the New York Stock Exchange, the NASDAQ, and the Chicago Board Options Exchange jointly report trades and quotes.

After nearly two years of operating under MIFID II, the EU still lacks a reliable view of liquidity across the EU. ESMA recommended the establishment of a EU wide real-time consolidated tape for equity instruments in December 2019, after finding that MiFID II had not delivered on its objective to reduce the cost of market data charged by trading venues and Approved Publication Arrangements. 

“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. “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,” said Adam Farkas, Chief Executive at AFME