As plans for a potential consolidated tape continue to simmer in Europe and the UK, it seems appropriate to give The Coba Project a nod in this week’s regulatory update at The TRADE.
Originally planned to be launched in the first half of 2013, the initiative was cooked up by industry veterans Graham Dick and Mark Schaedel in 2012. The model intended to absolve concerns around costs for a consolidated tape through a fixed price model: including €69 for addressable liquidity, €39 for reporting events (i.e., technical trades that investors could not have necessarily participated in), and €99 for a pan-European best bid and offer feed.
The commercial framework of the model was also intended – much like the current proposals put forward at the end of 2021 – to give trading venues a share of the revenue in return for their contribution depending on the extent to which it adds to price formation. Auction trades, for example, would be ranked higher than data from venues that import prices from price forming venues as they result from open order book participation.
Coba itself would be the tape administrator responsible for revenue allocation, billing, compliance and licensing vendors that wanted to distribute the tape. Providers would then be encouraged to compete based on rules developed by Coba.
The initiative, however, was never to leave the ground and was eventually abandoned altogether in March 2013 due a lack of support from providers and participants and due to a lack of quality of reported trades from systematic internalisers and over the counter (OTC) trading.
“Many of the challenges around a European consolidated tape today are the same as those that were discussed 10 years ago when myself and Mark Schaedel launched the Coba project,” Dick told The TRADE.
“The principal reason why Coba didn’t fly was that despite fairly broad industry support, as a privately led initiative, we were unable to get consensus from all of the exchanges and MTFs to contribute their data to the CT [consolidated tape]. Mandatory contributions are therefore an essential component for any CT to fly. Once you have a mandated data set theoretically all technical and commercial issues however complicated should be solvable.”
No further
Exactly 10 years later and the industry is no further in its attempts to implement a consolidated data source. In a Capital Markets Union (CMU) update in November, Europe proposed to implement a single real-time post-trade consolidated tape provider per asset class. The UK followed suit as part of its Wholesale Markets Review (WMR) update in April earlier this year, laying out loose plans for either a single tape provider or multiple but failing to provide details on whether a tape would be real-time or pre/post-trade.
Whether or not a tape is implemented on either side of the channel any time soon is a topic that’s being widely speculated. There has been a renewed push from France in recent weeks to settle on an agreed proposal to put forward to European Parliament, The TRADE understands, including plans for a real-time pre-trade tape with a revenue model that rewards all contributors.
However, the negotiations have stirred up concerns from other nations that have the power to put the brakes on the plans all together. Sources familiar with the matter confirmed to The TRADE last week that Germany is leading the opposition to a tape in a bid to protect incumbent exchange Deutsche Borse. With the European Union legal infrastructure set up the way it is, larger nations have the power to veto plans. Ten years on and we could be about to see yet another consolidated tape model flushed before it flies.
“The current proposal being negotiated solves for the previous lack of a contribution mandate but remains elusive around the issue of a lack of reported trades quality. There are lots of reasons why the policymakers continue to fail their mandate with MiFID,” Schaedel told The TRADE.