European exchange groups in the EU are joining up their data, as regulators in the bloc look to take on the dominance of United States markets. As the European Commission pushes to create a ‘consolidated tape’ – a single source of trading data that could improve price transparency and narrow spreads in the bloc – the exchanges have begun a joint venture on a potential solution.
Instead of several vendors providing data, a single, central source could become the de facto provider for the European Union, reducing costs and making its markets more attractive compared to US markets, which have had a consolidated tape for decades.
The new venture includes the three largest European exchanges – Euronext, Deutsche Borse and SIX – and was formed in response to a European Commission proposal to create a consolidated tape. A spokesperson for the joint venture said it is being set up ahead of a final decision by the commission and European Parliament, which are still determining the tape’s structure.
“Exchanges are standing for and are committed to stable and transparent markets. As such we do and did support a properly calibrated consolidated tape per asset class for EU markets,” the spokesperson said.
Once the scope and breadth of the tape are decided, the joint venture will still have to go through the European Securities and Markets Authority’s vendor selection process. If it is chosen, it would need to get a tape up and running within six months. Also included in the joint venture are the Athens, Bucharest, Budapest, Bulgarian, Cyprus, Ljubljana, Luxenbourg, Malta, Warsaw and Zagreb stock exchanges, as well as the Wiener Borse.
Negotiations about what the tape could look like have been running for years. Work on establishing the joint venture itself has been ongoing since July 2022. Some progress has been made in recent months. A decision to make the tape close to real-time was taken in December.
However, other sticking points remain, such as whether to include both pre- and post-trade data and revenue sharing for trading venues. Natan Tiefenbrun, president of Cboe Europe, said Cboe was encouraged that exchanges had dropped their opposition to a real-time tape.
“We have been exploring the viability of operating a consolidated tape for UK and EU equities and would welcome the opportunity to work with other exchanges, multi-lateral trading facilities and all other data contributors to deliver a viable tape that benefits all market participants,” he added.
The Association for Financial Markets in Europe, which represents European and global banks, said having potential providers ready is a good sign that a tape could be built once legislation is passed.
But Pedro Pinto, AFME’s director of advocacy and head of MiFID, reiterated its call for real-time pre-trade data to be included “to further integrate EU markets, attract international capital to the EU, and democratise access to market data in an affordable way.” The US consolidated tape, which was set up in the late 1970s, is considered the gold standard for what a tape can achieve. It collects both trade data and bid-ask quotes in real time from all US trading venues.
On a separate issue – there has been welcoming news for Asset managers who have seen fees from some sustainable funds jump very substantially – a saving grace in what was otherwise a dire year for the profession.
The sector endured one of its worst years on record last year, with some of the biggest fund houses in Europe recording a drop in revenue and profit amid a mass investor exodus from mutual funds. But ESG funds proved to be a bright spot, with management fee revenue generated by some sustainable products surging almost 400pc, according to Fitz Partners – research company providing independently calculated investment fund fees.
(The writer is our foreign correspondent based in the UK)
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