A regulatory backtrack on pre-trade data for EU consolidated tape would not be ‘commercially viable’, says EU asset managers

In a joint industry letter published by the European Fund and Asset Management Association, asset managers including JP Morgan AM, UBS and Vanguard, emphasise the importance of pre-trade data with fair prices for a consolidated tape.

With the forthcoming trilogues on the Mifid/r review, European asset managers have published a joint industry letter expressing their views on an appropriately constructed equities/ETFs consolidated tape and its significance for the Capital Markets Union – warning against the potential impacts a change of heart from regulators on pre-trade data could have.

Council members including the ministries of finance are reportedly defending their proposal for a post-trade tape as opposed to a real-time pre-trade tape, sources familiar with the matter have told The TRADE.

In the joint industry letter, members of the European Fund and Asset Management Association (EFAMA) – signed by firms including JP Morgan Asset Management, UBS and Vanguard – stated that they believe the consolidated tape should include ETFs and equities on a single tape and that data should be as close to real-time as technical possible.

Members also noted that it should provide both pre- and post-trade transparency in the form of five layers of pre-trade data and should benefit from a robust governance framework.

European asset managers support the European Parliament’s proposal for an equities/ETFs consolidated tape, however, noted that a potential backtrack on pre-trade data resulting in a post-trade only tape will not meet market demand required to make the tape commercially viable.

“This would be a legislative setback that European capital markets can ill afford with competing markets globally offering better trading conditions, and demonstrating growth to prove it,” said Tanguy van de Werve, director general of EFAMA.

In the joint industry letter, EFAMA attributed a reduction in trading volumes in European capital markets compared to the US and APAC to the absence of a consolidated equities tape – emphasising that it is difficult to showcase scale and stimulate cross-border investments without a single, reliable source of market data.

Global investment flows were also highlighted to have been impacted by a lack of consolidated price and liquidity data, with EFAMA noting that Asian and Latin American investors that are unable to access real-time volume data efficiently are overlooking EU ETFs when comparing those listed in jurisdictions where this data is available.

EFAMA also stated that the lack of consolidated liquidity data had a negative impact on small and mid-cap stocks alongside the acknowledgement that increased visibility and the ease of accessing complete liquidity and price data in a single place would provide an important boost for smaller markets.

Elsewhere in the joint industry letter, EFAMA emphasised the need for an EU consolidated tape to be fairly price to attract users, especially given that the market for trading data already has high prices and is suffering from a lack of competition.

“Cost of data already acts as a deterrent for banks/brokerages who choose not to trade in given markets given the high cost of market data,” noted EFAMA in the joint industry letter.

“The equities/ETFs tape should at the very least draw a line on these pricing practices that overall impair the ability of the Capital Markets Union to thrive.”