Fireside Friday with… Quoniam Asset Management’s Tobias Stein

The TRADE sits down with Tobias Stein, head of fixed income and trading at Quoniam Asset Management, to discuss the EU’s consolidated tape (CT) plans, unpacking key data considerations, empirical use cases, and what providers of the tape should consider.

From your perspective, how would you utilise the EU’s incoming CT, what would make it most attractive for your operations?

I would distinguish between the use cases: pre-trade, at trade, and post-trade. Pre-trade, we would use it for liquidity and price discovery in terms of our portfolio construction process, in the way that we integrate information in terms of credibility and associated cost upfront. Obviously, data from a consolidated tape could enhance the information that we have in terms of these pre-trade judgments on cost and on liquidity, so I think this would be the first use case.

At trade would be most likely for my trading team, obviously the relevant information in terms of market colour, in terms of the current market for instruments that are specifically a bit more frequently traded, that’s more on the trading side. Then, post-trade, I would expect that information to be used for our internal analysis in terms of execution, but also I would expect that this information would be excluded in typical TCA provider information as well, so in terms of analysis over execution it could be helpful.

What is the main obstacle from the buy-side point of view in terms of how the CT is being set up?

For us it’s relevant to have the data in a timely manner, there shouldn’t be too much lag in terms of the publication of information, otherwise our work at pre-trade and at trade would be affected.

Secondly, there’s still some talk in terms of which data points are specifically within the consolidated tape and for us the more specific the data, the better. Issues, like for example, does a specific trade result from a specific trading protocol (e.g. RfQ, portfolio trades, etc.) versus a single trade basically. Also, volume caps that are too restrictive would dampen the information content as well.

There was previously some discussion around compulsory consumption or contribution of data regarding the CT, is that still something people are talking about?

I think there should be a broad obligation to deliver data to the tape. If it has loopholes and blind spots it would be of less value to us. The greatest drawback aside from cost, is that it doesn’t cover the whole market and it doesn’t give a full picture. So, in my view, there should be a broad obligation to report the data.

You can understand the sell-side in a way, such that volume caps for trades that are beyond a certain threshold do make sense specifically in contrast to relatively short-term obligations to deliver the data, but otherwise I’m a proponent of very broad delivery obligations.

What do you think about the potential consolidated tape providers (CTPs) themselves and the selection process in general?

For us, I think the most relevant issues are twofold. First of all, the pricing of the information from the consolidated tape should be done in a way that fits into our budget, is not excessive, and is more related to the cost of production of the tape. Secondly, we want to make sure that that data is collected by a vendor who has no conflict of interest in terms of the business model with the data. 

Those are the two relevant questions for us at this stage in terms of the process and in terms of collecting. The consolidated tape discussion in the EU is not a new one, it’s been going on for several years. From our perspective, I think it’s definitely a positive that there seems to finally be a process being established altogether. In our view this is a good step forward.

Are there key points of differentiation between the UK’s CT, the US’s TRACE and the EU’s plans or are they following a similar line in your view?

From what I understand so far, they are basically following a similar line, obviously with differences in detail in terms of which data fields are published and other specificities. They indeed should do so because for the market, in terms of onboarding and using the data, it should be relatively easy, or easier, for us to integrate this information into our processes if it’s relatively aligned.