A consultation on plans for a consolidated tape of fixed income prices, announced by the UK’s Financial Conduct Authority (FCA), has drawn support from market players.
Commenting on the FCA’s plans to develop a consolidated tape for fixed income, David Everson, head of trading, fixed income EMEA at Liquidnet, said, “It makes sense that the UK would prioritise a Fixed Income consolidated tape first as the asset class has traditionally been much more opaque than, for example, equities. It will be interesting to see how this progresses.”
Tim Whipman, head of business development at TransFICC concurred, noting, “The FCA’s CT consultation paper accelerates the development of a UK tape for fixed income, prioritising it over equities.”
The move, in addition to several recently announced reforms of rules established under the Markets in Financial Instruments Directive (MiFID II), helps the UK market to function alongside the European market.
Whipman says, “There appears to be more alignment with the European CT in the framework, with just one CTP being selected per asset class, to be selected in 2024, and the tape consisting of real time post trade data only. But it’s the detail, to be consulted on, which will determine its success and cost from a technology perspective.”
It also sets out the operational architecture needed to underpin a more data led investment and trading environment, reflecting current trends in capital markets.
Vincent Grandjean, CEO at Propellant.digital, “The FCA’s announcement of measures to establish a CT is a crucial step in reinforcing the UK’s position as a global financial centre. By providing clear and low-cost trading data, the proposed CT will enhance transparency, improve data quality, and empower investors to make better and more timely decisions, ultimately leading to enhanced market quality and improved outcomes in wholesale markets. This announcement is a key step in a tumultuous journey.”
Neil Ryan, lead at the consolidated tape project run by Bloomberg, MarketAxess and Tradeweb consortium, said, “We welcome the consultation paper from the FCA and view it as a clear statement of the regulator’s intention to run a competitive tender process to appoint a single CT provider for bonds in the UK. We will review the consultation paper to understand the proposed structure and framework for the bond CT in the UK, and will continue our dialogue with the FCA on their work around the delivery of the CT.”
Everson says, “The prospect of both an EU and a UK consolidated tape will be extremely interesting to data hungry systematic/algo type houses. Real time trade prints and better pre/post trade data will also very likely accelerate further the electronification of fixed income markets.”
There are challenges however, as Everson notes, “The objective of having a regulatory framework in place by 2024 may be a little optimistic. These things tend to take much longer than expected to execute. The market will undoubtedly welcome the additional transparency that a consolidated tape may bring, particularly if it helps to drive down the cost to trade which, it could be argued, is increasing.”
It will also not be a panacea to issues around transparency and well-functioning capital markets.
“A fixed income consolidated tape will unlikely solve all the pain points overnight,” he warns. “The US has had TRACE for some time, yet suffers from similar obstacles around price transparency.”
©Markets Media Europe 2023
