A variety of firms ranging from exchange operators to trade associations have expressed confusion over the definition and implementation of consolidated tape rules under MiFID II.
The UK Treasury published its response to a consultation on MiFID II and revealed respondents agreed the text has created uncertainty.
Definitions set out for consolidated tape providers (CTPs), approved reporting mechanisms (ARMs) and approved publication arrangements (APAs) are “circular in nature,” the majority of respondents agreed.
Several respondents commented specifically on the “difficulties in relation to the CTP definition, and the uncertainty around the level of consolidation undertaken before authorisation is required.”
The Treasury explained following discussions with EU, the government has no reason to believe the approach set out for CTPs is not the right way to interpret the legislation.
“The government maintains the view that a data reporting service which provides trade data with respect to 100% of equity and equity-like instruments traded on all trading venues is a CTP.
“Entities providing a consolidated tape for 100% of trading all equity and equity-like instruments must therefore obtain authorisation,” the report clarified.
The Treasury added the government will maintain a direct copy of approach for the definitions of CTPs, ARMs and APAs.
“To reduce the element of circularity identified in the consultation, the government has amended the definition of “data reporting service” to refer directly to the services,” the report said.
Under MiFID II, CTPs are required to collect trade reports for financial instruments from trading venues and APAs and consolidate them into a continuous electronic live data stream, providing price and volume data for each instrument.