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Market Regulation

Consolidated Tape

August 3, 2020

Investors and the capital markets are best served through the delivery of a low-cost, real-time Consolidated Tape of all transactions executed within the Union. Optiver advocates for the intervention by legislators and regulators to form a public utility Consolidated Tape Provider (CTP) that can deliver a low-cost, real-time Consolidated Tape (CT) of post-trade data. This CTP should be operated as a non-profit utility serving the public interest, as it is essential to obtaining a complete and accurate view of European market activity and democratising this information for all investors at a low cost. Making this real-time, post-trade transaction information available serves the objectives of the European Parliament and market supervisors. It is of critical importance to the future financial wellbeing of Europe’s citizens.

CURRENT ENVIRONMENT

The efficiency of European capital markets, and by extent the financial wellbeing of Europe’s citizens, is compromised by decisions based upon limited information due to the absence of a Consolidated Tape (CT). The prohibitive costs to license and collate all of the regulated transparency data from across the Union requires the intervention by legislators and regulators to form a public utility Consolidated Tape Provider (CTP) that can deliver a low-cost, real-time CT of post-trade data.

The European capital markets remain remarkably heterogenous and fragmented with 142 distinct data aggregators claiming ownership of the pre- and post-trade transparency information required by MiFIR. A consequence of this fragmentation is that obtaining a complete view of European market activity remains a significant cost and challenge for even the most sophisticated of investors. This contributes directly to negative outcomes for market efficiency, confidence in market integrity and investor protection which has led to widespread calls from the industry for a low-cost consolidated tape to improve transparency of market price and activity.

Meanwhile the information available to non-professional investors is limited by the technical capacity of retail brokers and the financial capacity (and willingness) of their clients to pay for multiple data sources. As a result, investment decisions and the confidence of small investors is founded upon unnecessarily incomplete market information.

BENEFITS OF A CONSOLIDATED TAPE

Investors and the capital markets are best served through the delivery of a low-cost, real-time CT of all transactions executed within the Union. Optiver advocates that all trades in equities, whether conducted on a venue or bilaterally, be within the initial scope of publication to the CT. Of course, transactions eligible for delayed publication under MiFIR must retain those rights within the CT. Transactions in bonds and ETPs should follow directly once the CT is established and stable.

That the CTP be operated as a non-profit utility serving the public interest is essential to obtaining a complete and accurate view of European market activity and democratising this information for all investors at a low cost.

In focusing on real-time and post-trade data, the most relevant information can be made available to investors with the least amount of effort, complexity or delay. While the scope of a CT could be further expanded to include other asset classes or pre-trade information, the rapid establishment of a subscriber base and a sustainable future for the CTP must be the priority for Europe’s market supervisors.

No CT has become available due to three main factors.

  • The fragmentation of regulated post-trade transparency information across 142 distinct data aggregators.
  • Commercial licensing provisions of those data aggregators claiming ownership over this regulated data require a CTP to contract with, and pay redistribution fees to, each of them.
  • The disparate data formats used by those data aggregators to publish transparency information do not lend themselves to efficient collection and publication of unified, complete and accurate data.

PROPOSED SOLUTION

Legislating for the mandatory real-time contribution of all post-trade data in a uniform format to the public CTP by data aggregators is a necessary requirement to overcome these obstacles and establish a commercially viable and sustainable CTP. Such a requirement will not materially diminish the revenue of the aggregators as the CT represents data usage distinct from that of other real-time applications for market data. Profits generated by the CTP after operational costs should flow back to the contributors of data further re-enforcing the need for a public operator.

Complaints regarding the quality, comprehensiveness or over-reporting of transaction data do not negate the need or utility of a CT. On the contrary, widespread use of a CT will serve to highlight any sources of poor-quality data and foster improved transparency for regulators and investors alike.

While a CT is desirable for transparency, it would be inadvisable to mandate its use as has occurred in other jurisdictions. Implementing market rules that necessitate the use of CT data should only occur based on sound principles of market supervision or investor protection and not in an effort to improve the commercial viability of the CTP by creating a captive audience.

It is incumbent upon legislators and regulators to bring about the conditions which remove legal, financial and practical obstacles that have, to date, prevented the establishment of a Consolidated Tape. Creating a public utility Consolidated Tape Provider to deliver a low-cost Consolidated Tape of real-time, post-trade transaction information within the Union serves the objectives of the European Parliament and market supervisors. It is of critical importance to the future financial wellbeing of Europe’s citizens.