The Financial Conduct Authority (FCA), which regulates markets in the UK, sent out a press release hinting it might change rules concerning market data after it found that competition is “not working as well as it should”. As a result, the FCA wants to introduce a “consolidated tape” that would collect price data across the market and deliver it in standardized data feeds like in the USA.
The UK regulator is not stopping at price data. They also announced the launch of a broader study of market data to look at competition issues with data for benchmarks, credit ratings, and more.
So could Europe (finally) move to a consolidated tape? As I’m sure you know, there is no official consolidated market data feed in Europe. So both retail and institutional investors in Europe make trading decisions with an incomplete view of available liquidity and trading opportunities. Also, companies raising capital are unable to reach the complete European investor base. A consolidated tape would address these problems and more.
Past attempts to create consolidated tapes in Europe have failed due to exchanges and trading venues refusing to provide their market data at a cost low enough to make such consolidation viable. However, the European Union has proposed a law to create such a system.
Not surprisingly, the legacy market data providers want to maintain the status quo. The CEO of the London Stock Exchange, who owns Refinitiv, says (and I’m paraphrasing here) there is plenty of competition in the market data industry… nothing to see here… move along.
Benefits of Market Data Delivered via a Consolidated Feed.
Market data has been delivered in a consolidated feed in the USA for many years. So Europeans can see the many benefits of having a consolidated tape, including:
- Market participants would have a much better view of trading opportunities and liquidity
- Regulators could monitor and react to crises more quickly
- European capital markets could attract more global investment flows
- Companies in Europe would see increased investment as investors gained better access to their liquidity & pricing
- Data quality would improve across European markets under a standardized feed
I can attest to that last point about “data quality”. At DIH we offer market data for capital markets around the world and therefore know first-hand the challenges of collecting and processing data that should all be very similar (e.g. price data), but is annoyingly different because each exchange and trading venue has its own file specification and format.
The appetite for a consolidated tape in Europe continues to grow. Regulators see the competition problems and surveillance challenges with the current fragmented system. Market participants want better visibility of opportunities and liquidity. So Europe needs to reject the legacy data providers who want to keep the status quo and adopt a consolidated tape.
What about you? Would you like to see a consolidated tape in Europe? Please comment – I’d love to hear your thoughts.
P.S. You can read the complete FCA press release and download a copy of their report here… FCA Press Release