Five years on, how will the tale of the tape end?

Market participants have expressed concern that proposals in MiFID II are not substantive enough to facilitate the creation of consolidated tape, despite renewed pressure on exchanges to reduce data fees.

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Market participants have expressed concern that proposals in MiFID II are not substantive enough to facilitate the creation of consolidated tape, despite renewed pressure on exchanges to reduce data fees.

In addition to the charges levied by exchanges for their data, observers argue that the commercial approach to a consolidated tape – one of three solutions proposed in MiFID II – will not yield a timely or effective solution. 

In its October 2011 MiFID II draft, the European Commission opened the door for competing providers to create consolidated post-trade market data solutions based on pre-defined standards. Ensuring that data is of a sufficient quality prior to consolidation would be the responsibility of approved publication arrangements (APAs), new entities created by the directive. MiFID II also proposed a mandated and call for tender option, but the Commission stated its preference for a commercial solution.

The fragmentation of liquidity that resulted from the first iteration of MiFID in 2007 makes it difficult for market participants to benchmark and analyse their executions against a standardised source of post-trade data. While larger sell-side firms have devised proprietary versions of the tape, a common industry-wide solution is yet to emerge.

“Ultimately, the lack of a consolidated tape continues to be a big issue,” Gregg Dalley, head of EMEA trading, Schroder Investment Management, said in the Q1 edition of The TRADE. “MiFID was supposed to create transparency but from a post-trade reporting perspective, it's the worst it has ever been.”

According to Richard Semark, head of European client trading and execution relationships at UBS, the commercial incentive to offer a consolidated tape is not strong enough.

“The competing providers proposal is essentially no different to what we have faced over the last five years, where regulators were waiting for an industry-led solution,” Semark told “It’s unlikely we will solve all the problems without one body that is mandated to do this.”

Costly consolidation 

One of the primary problems for market participants is the cost of compiling a consolidated tape, with stock exchanges criticised for charging too much for their market data, despite reductions and unbundling coordinated by trade body the Federation of European Securities Exchanges (FESE).

The current version of MiFID II states that data must be made available on reasonably commercial terms, but Niki Beattie, managing director of consultancy Market Structure Partners, said more must be done.

"The concept of making market data available on a commercially reasonably basis is vague and it's unlikely that regulators would step in and stipulate what data costs should actually be,” said Beattie. “Exchanges have paid lip service to reducing market data costs, but what they really need is to give firms the option to break down the data they take by index, or even by individual stock.”

But she admitted that the likelihood of exchanges doing this is slim given the negative impact it would have on their data revenues.

Semark added: “We are in a position where the incumbents have strong vested interest in maintaining the status quo. If prices were forced down to facilitate a consolidated tape, we would want the authorities to keep a close eye on other forms of data costs, like non-displayed data used to calibrate algos.”

A further incentive for exchanges to reduce data costs is the decision by BATS Chi-X Europe to become the first multilateral trading facility to charge for data from October. The fees levied by BATS Chi-X Europe for its pan-European feed are a tenth of the aggregated fees charged by the underlying domestic markets.

“It is now up to the industry to push the debate further with what we think is a good quality reference point,” BATS Chi-X Europe CEO Mark Hemsley told

Technical details 

But cost is not the only issue. There are also technical aspects of the consolidated tape that need to be resolved, such as which trading venues are included, a common timestamp and the formatting of data.

“The key to creating a consolidated tape lies with fixing the underlying data,” said Beattie. “APAs are a big improvement, but MiFID is still very high level and there needs to be some consideration on how the this regime will be implemented.”

FESE and standards body FIX Protocol Limited collaborated to solve some issues, such as harmonising exchange flags used to tag trades and the identifiers for different types of OTC equity trades.

Such initiatives have run into difficulties as market participants with vested interests look to have their say.

“A central mandated body can take all these aspects and propose a single solution.,” said Semark. “When you hit thorny problems, you have one body responsible for solving it, as opposed to lots of committees likely to come out with different solutions.”