The push for a consolidated tape (CT) for the UK and Europe is accelerating, as banks, asset managers and European exchanges work to come up with a winning solution to aggregate trade information from all trading venues.
The US has had a CT since 1976 that gathers together pre- and post-trade data for its regional stock exchanges, allowing users to get an overall picture of market activity. In the wake of Brexit, the idea of a CT in Europe gained significant traction as a potential solution for the market fragmentation in the continent. The road to a CT
The UK’s Financial Conduct Authority (FCA) has said: “We expect a CT to strengthen UK markets by making them more transparent and liquid. [It would] provide a comprehensive picture of transactions in a specific asset class, bringing together trades executed on trading venues as well as those arranged over-the-counter.”[1]
The UK is looking into creating a CT for equities (shares and exchange traded funds (ETFs)), alongside a CT for bonds. The regulator is currently in a consultation phase for its equities CT, appointing Europe Economics to make an independent analysis of the case for a CT, with an update expected by the end of the year.
The UK’s bond CT will be launched in December 2024. The FCA is currently inviting applications from providers until January 2025 and it will announce the winner of the tender process in April 2025. Europe is on a similar, though slightly longer, timeline with its bond CT. The European Securities and Markets Authority (ESMA) said at the end of September that it plans to launch its selection procedure for a CT provider on January 3, 2025.[2] ESMA wants to make a decision on its selected applicant by July of next year.
June 2025 will see the launch of the first selection for an equity CT provider, with expected authorisation coming in early 2026. Europe is also looking at a CT for OTC derivatives, which will launch in Q1 2026, with authorisation expected towards the end of the year or early in 2027. Benefits and challenges
There are clear transparency benefits in having a single source of market data for investors and traders. Regardless of the venue, market participants would be able to improve price discovery, more accurately value securities and deliver best execution on orders. It also has the potential to improve liquidity by aggregating fragmented order books. Regulators would also gain a better overview of trading activity, which would help to monitor for any market manipulations.
However, implementing a CT across the region will be a complex and costly process, as it crosses different trading systems, regulatory frameworks and data formats. Competition heats up
In both the UK and the EU, there is significant competition for the position of CT provider. In the US, CT is run by a group of exchanges, but on this side of the pond, banks, asset managers and data firms are also in the mix.
In Europe, EuroCTP, a consortium of 14 exchanges including Deutsche Boerse and Euronext has already invested millions of euros to start building a shares CT, despite the competition remaining open. French consultancy Adamantia launched a feasibility study for a stocks tape in 2021, with support from major European banks like Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, Societe Generale and UniCredit. Adamantia said it is securing an investment plan and selecting a technology company for a tape, backed by ten buy- and sell-side institutions, according to Reuters.[3]
Most recently,TransFICC, a specialist provider of low-latency connectivity and workflow services for fixed income and derivatives markets, announced its bid for the UK’s bond CT.[4] Three other bidders are hoping to build CTs for both the UK and the EU. Etrading Software launched its bid for both bond CTs in May[5] and FINBOURNE and Propellant Digital have also joined forces to bid in both the UK and Europe.[6]
TP ICAP joins the fray
Fixed income technology provider Ediphy launched FairCT in September, a consortium that includes Google Cloud, UBS, TP ICAP, Cboe Global Markets, FactSet, and Norges Bank Investment Management.[7] FairCT is currently working on bids for bonds, shares and ETFs, and derivatives in Europe and bonds in the UK, with equities and derivatives still under consideration.
Chris Murphy, CEO of Ediphy, said:
“Our approach is fundamentally different from other contenders. First, we aim to return any economic value generated by the consolidated tape provider over its costs and reasonable returns to the users of the tape. Second, we have built this initiative as a collaboration between multiple participants representing all stakeholder groups.
No other potential tape provider brings this diversity of experience nor delivers as fully on the alignment of product and customer needs, as proposed under the FCA Consumer Duty commitment.”
© 2024 ICAP Information Services Limited (“IISL”). This communication is provided by ICAP Information Services Limited or a member of its group (“Parameta”) and all information contained in or attached hereto (the “Information”) is for information purposes only and is confidential. Access to the Information by anyone other than the intended recipient is unauthorised without Parameta’s prior written approval. The Information may not be not used or disclosed for any purpose without Parameta’s prior written approval, including without limitation, storing, copying, distributing, licensing, selling or displaying the Information, using the Information in an application or to create derived data of any kind, co-mingling the Information with any other data or using the data for any unlawful purpose of for any purpose that would cause it to become a benchmark under any law, regulation or guidance.
The Information is not, and should not be construed as, a live price, an offer, bid, recommendation or solicitation in relation to any financial instrument or investment or to participate in any particular trading strategy or constituting financial or investment advice or a financial promotion. The Information is not to be relied upon for any purpose whatsoever and is provided “as is” without warranty of any kind, either expressly or by implication, including without limitation as to completeness, timeliness, accuracy, continuity, merchantability or fitness for any particular purpose. All representations and warranties are expressly disclaimed, to the fullest extent possible under applicable law. In no circumstances will Parameta be liable for any indirect or direct loss, or consequential loss or damages including without limitation, loss of business or profits arising from the use of, any inability to use, or any inaccuracy in the Information. Parameta may suspend, withdraw or modify or change the terms of the provision of the Information at any time in its sole discretion, without notice.
All rights, including without limitation intellectual property rights, in and to the Information are, and shall remain, the property of IISL or its licensors. Use of, access to or delivery of Parameta’s products and/or services requires a prior written licence from Parameta or its relevant affiliates. The terms of this disclaimer are governed by the laws of England and Wales.
