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Western EuropeOctober 28 2020

Workable ‘consolidated tape’ vital to EU capital markets union hopes

Establishing near real-time record of trade prices key to making pan-European project viable, says top European Commission official.
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Workable ‘consolidated tape’ vital to EU capital markets union hopes

The successful launch of a “consolidated tape” is an objective benchmark by which the success of an EU capital markets union (CMU) can be measured, says Tilman Lüder, head of the securities markets unit at the European Commission.

EU authorities have been exploring the technicalities of creating a single, near real-time record of trade prices, known as a consolidated tape, for equities and bonds for several years but to date no data provider has been able to meet its wide-ranging requirements.

“It’s the one thing that will hold the European landscape together,” Mr Lüder told delegates at the Association for Financial Markets in Europe’s annual conference on October 7-9.

“If we manage to create a decent consolidated tape between all the different European venues and if we manage to use the tape as a tool to make these markets attractive and competitive – so that people want to come to Europe and trade because it is a fair and transparent system – then we will succeed,” Mr Lüder said.

European Consolidated Tape outlook

The European Securities and Markets Authority (ESMA) and the European Commission have looking into a European Consolidated Tape (ECT) as part of wider consultations on the review of the Markets in Financial Instruments Regulation and Directive (MiFIR/MiFID II).

Among the ideas floated at the time were selecting an exclusive provider for five to seven years, forcing venues to provide the data, making users pay for the tape so it is properly funded, or consolidating nearly all transactions across asset classes on the tape.

Industry reaction to the implementation of an ECT has been mixed. Some businesses view it as a means of driving down data costs and fostering cross-border activity while others view it as unachievable.

However, Mr Lüder sees an ECT as much more than just driving down the cost of data. “The tape is really about bringing fragmented trading venues together and that goes across many asset classes,” he said, adding that the European Commission’s ambitions go beyond establishing a consolidated tape for equities and would like one for bonds as well.

“The consolidated tape is more an instrument for the internal market — it is not primarily a tool to solve market-data costing issues,” he said, adding that its establishment would not be prohibitively expensive.

He said ESMA will soon put out guidance on an ECT and will cover areas such as costs, pricing and this will provide some clarity on data fee schedules.

This article first appeared in The Banker's sister publication Global Risk Regulator.

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