European exchanges join consolidated tape selection process

European, exchanges, tape, processThe announcement by 14 European exchange groups to create a joint initiative that could lead to a consolidated tape (CT) for equities in the European Union has been broadly welcomed, but fund leaders re-iterated certain needs to ensure it works for the good of the wider market.

The project comes in response to the European Commission's proposal for an equities tape to contribute to the development of the Capital Markets Union.

The participating exchanges - present in twenty-six Member States of the EU - have signed a term sheet to establish a joint venture that will evaluate and prepare an application as a CT provider in a future selection process.

The project will focus on providing a tape designed to provide a comprehensive, standardised and consistent source of market data.

The agreement marks a turning point in how exchanges have approached the issue of real-time equities data, according to Natan Tiefenbrun, president of Cboe Europe.

He said: "We are encouraged that Europe's national exchanges have dropped their long-standing opposition to a real-time consolidated tape for EU equities and have embraced our long-held view that a real-time pre-trade tape would bring significant benefits to investors of all types, and thereby help grow the European equity market ecosystem."

In response to the initiative, the European Fund and Asset Management Association said there is potential for an equity or ETF consolidated tape to "attract more capital flows into mid-cap and small-cap stocks, as well as smaller markets generally".

Tanguy van de Werve, director general of Efama, said: "It is our sincere hope that the review of MiFID/R [market infrasturcutre regulations] will yield a viable framework for the emergence of a consolidated tape. The recent announcement by 14 exchange groups is welcome in this regard.

"Nevertheless, it is important that the resulting equities tape displays both pre- and post-trade equities/ETF data in real-time. From a cost perspective, the equities/ETF consolidated tape should be provided on a reasonable commercial basis, as already foreseen in MiFID/R".

The German investment funds trade body, BVI, hoped that any eventual proposals would deliver data to users "as close to real-time as possible". 

An equity/ETF tape delivering data at a second speed (1000 milliseconds) is sufficient to improve displayed transparency to both retail and institutional investors, the BVI said. This would impede very little on the existing market data business of the exchanges, which focus on low latency data feeds (average 4-5 milliseconds).

Further, the BVI said a CT could strengthen the ability of both institutional investors and retail investors who trade via brokers to improve their trading process and best execution by providing them with immediate access to trading activity, liquidity and prices. Visibility of pre- and post-trade information would mean investors could see prices and liquidity before they make decisions, "ensuring that they can invest efficiently and cost-effectively and enabling them to achieve best execution".

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