Asset managers and other market participants are unlikely to see reduced market data costs in the EU under plans for a ‘consolidated tape’ – the digital, real-time publication of market data.
Bloomberg Intelligence said greater transparency would result from the consolidated tape, but data bills – which have been described as “excessive” by industry bodies – for asset managers, broker-dealers and market makers were unlikely to go down.
In December 2019, the European Securities and Markets Authority (Esma) recommended a consolidated tape for equity markets after finding that the ‘MiFID II’ reform of capital markets introduced two years earlier had not delivered on an objective to reduce the cost of market data charged by trading venues and ‘Approved Publication Arrangements’ (APAs).
MiFID III is currently on the horizon and could see the introduction of a consolidated tape. Nearly three quarters (71%) of respondents in a survey carried out by Bloomberg Intelligence backed the move for a consolidated tape in the EU. This increased to 89% among larger firms with heavier cross-border business.
However, Bloomberg Intelligence also said that trading costs could rise if regulators made consumption mandatory and forced asset managers to pay for a “bulk of data they don't need and won't use”. As a result, only 58% of small firms surveyed were in support of the move.
The creation of a consolidated data-tape is said to be a more complex task in the EU than the US, given the bloc’s diversity of markets.
Sarah Jane Mahmud, senior government analyst at Bloomberg Intelligence, said a bloc-wide real-time data tape is unlikely to be market ready by 2025.
“The proposals may now be wider in scope, encompassing bonds, ETFs and derivatives as well as equities. Extensive legislative changes would be necessary to make CT [consolidated tape] provision commercially viable, including new rules on data quality and pricing,” she said.
“UK policy makers, meanwhile, are pressing ahead with plans to create a national post-Brexit CT with a July 1 consultation.”
Mahmud said that regulators, in the interest of costs, may look to appoint a single, exclusive consolidated tape provider on a limited contract, subject to evaluation every five to seven years.
However, without a strong governance framework and robust regulatory oversight, there would be the risk that a sole provider might charge “monopoly rents” or be unresponsive to market needs.
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