FIX Protocol Limited, the standards body for securities messaging, has set out a proposal for the establishment of a governance body and the standards setting process that it says will be necessary to develop a European consolidated tape.
The proposal, submitted by FPL for consideration by the Committee of European Securities Regulators (CESR), identifies that standards setting and governance are two key business processes that would be required for the establishment and effective delivery of a consolidated tape in the European markets. Under FPL's proposal, a Consolidated Tape Delivery Authority (CTDA) would be established by market participants as a not-for-profit entity and overseen by a governance board elected and made up of representatives from across the industry.
Requirements for the ECT were proposed by CESR, the body which harmonises regulation across Europe, in technical advice submitted to the European Commission in July 2010. Market data provider Thomson Reuters has since announced it will launch its own offering to manage the tape before the end of August 2011.
“To date the industry has already created a number of consolidated tapes, but the absence of any universal standard has stifled widespread acceptance or uptake,” said Stuart Adams, FPL's regional director, EMEA. “FPL proposes that the use of open standards for the content and delivery of a consolidated tape would prove hugely beneficial to market participants and regulators, this would effectively address the success criteria set out by CESR and enable data providers to compete with their added value services.”
According to the document submitted by FPL, its own professional staff would be engaged to support and drive the activities of the CTDA, however it notes that the proposed structure does not presume that FPL would be the body to run the consolidated tape. Adopting the structure would be advantageous, suggests FPL, inasmuch as it would ensure the correct governance would be in place regardless of the party selected to manage it.
FPL said strong governance would be needed by the CTDA to cope with potentially contentious issues arising from CESR's proposal, such as the tape being available “at a reasonable cost”, “in as low latency a form as is reasonably possible” and that the “operator of the consolidated tape would be responsible for the detection of possible multiple publication”. The proposed governance board would oversee the activities of the two separate processes of standard setting and implementation, plus it would oversee any third-party tendering, statement of accounts and arrangements of funding the ECT. The board would be responsible for ensuring that the CTDA and ECT meet the success criteria set out by CESR in its technical advice. Under the proposal the board would work closely with regulators at all times.
FPL has previously indicated a willingness to play a role in the creation of the consolidated tape, but emphasising that its precise nature would depend on FPL's members.
The organisation notes that the CTDA would require initial start-up funding and resourcing although does not go so far as to suggest budgets. In the absence of start-up funding being available either from national or European authorities, FPL suggested it may be available from market participants.