European Commission pushes for consolidated tape in bond markets

The EU regulator has set out plans to carry out a further review of MiFID and MiFIR in 2021 which will include the design and implementation of a consolidated tape.

The European Commission has set out plans to push for a consolidated tape in the European primary and secondary bond markets following months of pressure from market participants. 

In the report, the Commission said it would be conducting a further review of MiFID and MiFIR this year that would include plans to design and implement a consolidated tape.

The EU regulator said the design will initially focus on corporate bond issuances, offering a central database which aggregates various post-trade data sources into a single view.

“A consolidated tape will ensure that more trading takes place on transparent regulated platforms, thereby increasing market depth and attractiveness of euro-denominated securities both for issuers and investors,” said the Commission in the report.

Concerns around the high costs of developing a tape in a restrictive regulatory environment with a lack of commercial benefits have thwarted efforts to develop a tape in the past.

The Commission’s report follows months of pressure from parties eager to implement a system similar to the one in place in the US after MiFID II only laid out requirements for voluntarily consolidated tape providers in Europe.

“We are very pleased to see an explicit commitment for an EU post-trade consolidated tape for bond markets which has been a key advocacy aspect for ICMA’s MiFID II Working Group and more specifically the bond consolidated tape taskforce members,” said Liz Callaghan, director for secondary markets at the International Capital Markets Association (ICMA)

“A centralised, accessible, and affordable source of aggregated post-trade bond data will provide the bond market with the transparency needed to assist decision making and provide comprehensive market insight, benefitting end investors – large or small.”

The European Fund and Asset Management Association (EFAMA) called on regulatory authorities in May to mandate a consolidated tape stating that the rules had failed to deliver the market data system due to a lack of enforcement on the notion of ‘reasonable commercial basis’ for the costs of market data.

“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,” said EFAMA in its MiFID II review.

Several participants also used the MiFID II review last year to demand a consolidated tape, including buy-side heavyweight BlackRock who said it would “increase transparency and strengthen best execution, while simultaneously improving competitiveness of European capital markets and contributing to the delivery of Capital Markets Union.”