FILS Europe 2023: Long overdue consolidated tape is a ‘big missing piece’ in European market infrastructure

Panellists agreed a consolidated tape could – if approached correctly – provide various benefits to the market, whilst stressing the need for industry participation to ensure its success.

Data continues to be a huge theme at this years Fixed Income Leaders Summit, with recent approvals from UK and EU regulators for a consolidated tape in the near future bringing the discussion to the forefront.

Whether a consolidated tape will be useful in both pre- and post-trade analysis was without dispute, with all panellists seemingly accepting the benefits it could provide. However, one panellist noted that the discussion of a consolidated tape is nothing new and it is somewhat overdue.

“We have been talking about a consolidated tape since 2007. We’re now promised by both UK and EU regulators that it will be delivered next year, but seeing is believing. However, it will be helpful, as long as it is accessible, reasonable charged and creates transparency across both retail and institutional businesses.”

There has been widespread discussion about the things necessary to make the introduction of a consolidated tape successful, including that it should be resilient and cost-effective, providing timely, good quality data. Panellists highlighted the need for the industry to work together to ensure the success of its introduction.

“There is an opportunity to get it right and we as an industry should all contribute to make sure of this. Whether that’s through the right governance or the right licensing, we need to come together to ensure it is successful. There is also a need to calibrate it in the right way – we don’t want an approach where everything is made available immediately and it hurts liquidity provision,” said one panellist.

“The benefits of more data, transparency and what it does for modernising the market, vastly outweigh the any sort of concerns. This is one of the real big missing pieces of European market infrastructure if you compare us to the US.”

However, despite a common agreement that a consolidate tape could provide various benefits to UK and EU markets, one panellist highlighted how it could have a negative impact on liquidity provision.

“There’s definitely a worry, especially in liquid markets, that too much transparency could be detrimental for liquidity provision. However, the key thing with calibration is simplicity. As we saw with Mifid II, it tried to calibrate it but it was way too complex. Now, we are going through a dangerous route where new proposals can be even more complex. So we need the right calibration, but it has to be simple.”

Panellists also highlighted that the data only gets better with use. They agreed that one of the key issues over the last few years has been the lack of a consolidated tape provider, which led to very few people actually using this data.

“The moment we start using it, the better it will become,” concluded one panellist.

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