While the term ‘tape’ may have you thinking of old-school, clunky recording devices or DIY art projects stuck together with flimsy sticky plastic, consolidated tape could be the key to creating unified, fair and efficient EU markets.
With approximately 500 trading platforms for bonds and equities across the EU, it is no surprise that market information and data is somewhat fragmented. Volumes, time and price of transactions are all essential elements for providing market participants with a comprehensive overview of markets, yet there still remains to be a system in place to deliver a consolidated view of all trading information across the entire EU.
Tackling fragmented markets
One of the ambitions of the Capital Markets Union is to create a consolidated tape to improve transparency and develop fair, efficient and resilient markets in the EU. A consolidated tape is an electronic system that collates real-time data, such as price and volume of orders or transactions, and disseminates it to market participants. This will give investors a detailed overview of the markets and allow them to see whether they obtained best execution for their trades. It could also improve competition between trading venues, by identifying those with better prices and liquidity, and ultimately, can lead to the EU capital markets becoming more attractive, not only internally, but also internationally.
A case for bonds and equities
Easy access to affordable, complete and accurate market data increases investor confidence and leads to more participation in a market. Given the importance of equity and bond markets, as well as their fragmented nature due to multiple trading venues, there is a clear and urgent imperative for a consolidated tape to help build deeper and more open capital markets in Europe.
“In order to create a successful consolidated tape for equities it is crucial that pre-trade data is included,” commented Stephen McGoldrick, GM Regulatory Affairs at BNP Paribas. “Not only will this make the consolidated tape commercially viable but it will also improve the transparency of Europe’s equity markets while making significant tangible progress towards the key policy objective of a Capital Markets Union across the EU.”
In order to create a successful consolidated tape for equities it is crucial that pre-trade data is includedStephen McGoldrick, GM Regulatory Affairs, BNP Paribas
Barriers to success
While the benefits may seem clear, there are still a number of challenges to developing a consolidated tape. For example, it relies on individual trading venues providing data to the consolidated tape provider, which then raises a question of intellectual property. Mandatory contributions by trading venues, revenue models and data quality also need to be addressed to ensure the efficient and successful running of a consolidated tape. Quentin van Lidth, Regulatory Affairs Specialist at BNP Paribas, discusses these challenges in The EuroFI Magazine, as well as key success factors for making a consolidated tape a reality. Read the article below.
We support the ambition to build a Capital Market Union, improve MiFID II/MiFIR, develop fair, efficient and resilient markets and, to this end, build a consolidated tapeQuentin van Lidth, Regulatory Affairs Specialist, BNP Paribas