With the UK bond consolidated tape now almost four months into operation and its EU counterpart preparing to go live, discussions at this week’s Fixed Income Leaders Summit revealed a market still divided on adoption – with a growing question over whether firms want the benefits of consolidated data without paying for it.
Although some firms have already confirmed plans to leverage the tapes, approximately 20% of audience participants stated that the tapes were irrelevant and they would not use them, when surveyed during the consolidated tape panel.
Similarly, the panel saw a shift in focus when reflecting on audience responses to why they would not use the tape, with one answer stating that the “value would come free through someone else, if they wait long enough”.
Rebutting this sentiment was Francesco Cicero, chief executive of fairCT, who argued that this scenario would likely not be viable, due to the regulatory foundations and set up behind the tapes.
He stated: “The idea is that behind this democratisation of the data is that everyone pays a fair share. If you look at the price lists on the UK side, they’re particularly appealing, and on the European side, they are equally extremely viable.
“Nothing is unfair in the way the tapes are targeting the market. There isn’t really a scenario where you just get it for free because someone will deliver – if someone delivers the data for free, and they are not supposed to, they are breaching the agreements.”
Read more – UK bond consolidated tape clears first hurdle as quest for integration continues
Also echoing this sentiment was Virginie Saade, head of government and regulatory policy, EMEA at Citadel.
For Saade, universal market access to the tape data is essential to foster liquidity and fairness and will act as the “windows of the European market for the world to see through.”
Hence, Saade argued that the decision to engage with the tape is ultimately a question of whether firms want to take the initiative or risk being left behind – rather than waiting for access to the data through third parties, firms should consider the cost and efficiency of that approach against the benefits of taking a more proactive role.
“I would argue that you have a choice. If your manager comes to you and asks why you don’t consume this data, you have to think – is it because you don’t want the full market data into the organisation, or is it because you want to consolidate the data in a more expensive and less efficient way? Surely you want to be leading the drive rather than waiting for something to happen?”
Building on this, the general sentiment from the panel was that direct access to the tape data – instead of gaining it through other vendors – offers more control and efficiency.
The question of whether there is a free rider problem regarding the tapes was certainly up for debate, but Sassan Danesh, chief executive of Etrading Software, argued that adoption will likely outweigh these numbers, to avoid falling behind the curve.
He added: “Do we have a free rider problem? I’m a lot more optimistic around do we have a free value problem? No, and the reason is if you have four out of five of your peers taking the data and having more visibility in the marketplace, are you going to be the one who wants to be blind? No, is the short answer.
“But does everybody need to be a leader? Of course not. You’re going to have some leaders, some in the middle of the pack, and some lagging.”
How truly relevant are the tapes?
Discussions around adoption also brought to mind the question of whether having a consolidated tape for bonds in the UK and Europe is genuinely essential for market structure and efficiency.
Across the panel, the resounding response was yes – that the tapes are foundational infrastructure to improve transparency, market efficiency, and competitiveness in European bond markets.
Read more – Demand for UK bond consolidated tape holds strong following launch
Supporting this, Saade commented: “I quote Deming, a very famous US Economist who said, ‘in God we trust, all others must bring data’. What really matters is that we level the playing field. So ultimately we want everybody to have the data, as this democratises access and allows the bond market to play its role in supporting the real economy.”
Elsewhere, Cicero also indicated that the argument around the tapes not being relevant in their current format should be reformulated, due to the structure and design of the tapes themselves.
He argues that the role of the tapes is to serve as a market pillar, by collecting information rather than generating the added value services.
“The tapes are very relevant in the current format because they are supposed to be a foundation. Then there is a next layer which is the aggregators, and it’s designed that way. Our output, if we are successful, is that we deliver the tape exactly the format that it was designed to deliver.”
This structural, foundational role was also recognised by Vegard Vik, special advisor, market structure and strategy at Norges Bank Investment Management.
He asserted: “To me, these guys are utility providers. It’s a kind of waterworks. They take the data from different sources and provide water to the market – but if they provide polluted water over time, that will kind of destroy the business model.”