Fund and asset managers in Europe have called on regulatory authorities to mandate the creation of a consolidated tape as part of their response to the review of MiFID II.
The European Fund and Asset Management Association (EFAMA) prioritised the consolidated tape in its reaction to the MiFID II review, stating that the rules had failed to deliver the market data system, partly due to a lack of enforcement on the notion of ‘reasonable commercial basis’ for the costs of market data.
“Despite not being the ultimate remedy to all transparency issues, we insist on the need to implement a well thought-through consolidated tape. We would also add that the lack of strict enforcement of the rules related to the access to and the payment of data is detrimental to the creation of a consolidated tape,” EFAMA said.
“We consider that the absence of enforcement of the ‘reasonable commercial costs’ principle constitutes a barrier to transparency, as the cost of data may lead some market participants to refrain from seeking quotes for some instruments.”
Efforts to develop a consolidated tape in Europe have been thwarted in the past due to concerns around the high costs of developing a tape in a restrictive regulatory environment with a lack of clear commercial benefits, despite widespread pleas from participants in both equities and non-equities.
MiFID II laid out requirements for voluntarily consolidated tape providers, but it did not mandate the establishment of a consolidated tape that firms would have to submit transaction data to, as is the case in the US.
Multiple buy-side heavyweights, including BlackRock, have used the review of MiFID II and the European regulator’s consultation on the issue to renew calls for a consolidated tape. BlackRock’s response to the MiFID II review said that a consolidated tape would serve to further contribute to transparency of European markets.
“A successfully governed European consolidated tape would be transformative for markets and for investors,” BlackRock said. “It would bring clear benefits; increasing transparency and strengthening best execution, while simultaneously improving competitiveness of European capital markets and contributing to the delivery of Capital Markets Union.”