Battle lines are drawn over European consolidated tape plans

Cboe, AFME, EFAMA and BVI have drafted their position on how they think a consolidated tape should be implemented in Europe; the German finance ministry is reportedly leading the opposition.

Participants have drawn their battle lines as the ramp up towards the implementation of a consolidated tape in Europe continues.

Following a working group meeting of the Council of Ministers on 24 May, Cboe and industry associations AFME, the European Fund and Asset Management Association (EFAMA) and German funds association BVI have published their position on plans for a tape: including their preference for a single pre-trade real-time tape provider and a recommendation for mandatory contributions.

The firms said the intention was to “demonstrate a consensus” among data consumers.

“There are no technical barriers to the introduction of a real-time pre-trade consolidated tape. There are only commercial ones. The tape poses no threat to the revenue of smaller exchanges. Only a real-time pre-trade tape is going to enhance and strengthen the European markets,” Cboe Europe’s head of European equities Natan Tiefenbrun told The TRADE.

“Implementing either a post-trade or delayed tape first is not a stepping stone to progress as these options would be a commercial failure. The chances that you then get to build on that and create a pre-trade tape is slim because there is no success to build on. Those are not compromises, those are traps.”

The position also sets out that the revenue model should include all contributors as opposed to just the incumbent exchanges, an issue that has been heavily contested by various participants since the original proposal put forward in November.

There has been a renewed push from France in recent weeks to reach a conclusion around consolidated tape proposals under its presidency of the European Council, which is due to finish at the end of June, The TRADE understands. In the meeting of the working group on 24 May, it reportedly put forward plans for a real-time pre-trade tape with a revenue allocation model that rewards all contributors.

However, other nations have relayed their concerns around the implementation of a consolidated data source, in particular the German finance ministry which, according to sources familiar with the matter, led the opposition to a European tape during the most recent working group meeting due to concerns around payment for order flow and in a bid to protect the interests of Deutsche Börse.

Deutsche Börse had not responded to a request for comment at the time of going to press.

As the EU framework allows larger member states to veto plans, if Germany were to oppose plans for a tape it could significantly delay or even throw out the plans all together.

Last week’s meeting was the first of several, and member states are expected to give written feedback to the French proposals discussed on 24 May in the coming weeks. Members of the European parliament are also expected to publish their report on the parliamentary side in the coming months. The council, parliament and the European Commission will then meet for the trialogue period at some point towards the end of this year – in a best-case scenario.

“If the interests of investors and the interests of large exchanges diverge which, appears to be the case around this topic, then surely in these circumstances it’s the responsibility of policy makers to put the investors first – including by strengthening the competition to meet their needs,” Tiefenbrun added.