Market practice makes (a CT) perfect!

Our recent webinar highlighted the strong appetite from regulators, authorities and the market to deliver Consolidated Tapes (‘CT’) in the UK and the EU.  

To date, we have been constructively vocal on the issue of data quality (consolidation/aggregation, consistency and coherence) and believe that the precursor to any successful CT, will be the provision of accurate and trusted transaction and reference data.

Following engagement with the major stakeholders, and FINBOURNE’s own Design Council, we believe there are solutions to the issue of market data that can help solve the problem and create a path forward.  We fully support the proposal to create Expert Data Groups for each asset class and we believe that any channel to improve the interaction between industry, the authorities and the regulators, must be encouraged.

Another aspect of the discussion is that of differing models. The EU is moving towards a single tape (across equities, bonds, derivatives and ETFs, as a sub-class). However, following the recent publication of the UK’s Wholesale Markets Review, the UK HMT presently supports, a competitive, multiple-tape model (for post trade fixed income).  

A multiple-tape model may minimise single points of failure, avoid the creation of a ‘monopoly’ and serve market demand for different levels of products or services.  In contrast, many market participants find this approach challenging, citing issues of complexity and increased costs associated with multiple-CT data deliveries, as well as potentially ignoring the data quality point. 

There were strong submissions made and conflicting views, on the different routes taken but feedback at our webinar confirmed the view that the market seems keener on the former, rather than the latter.

While challenges persist with the creation of a  derivatives CT, the constructive approaches being proposed allow for a discussion about the usefulness of this particular data, as well as reinforcing what data fields are required to service different needs.

Sprinting to the finish  

In our view, there is clear opportunity for industry to set market practice and create  a uniform method that clearly prescribes how APAs/trading venues and market participants should recognise transactions within existing data fields. This would provide the optimal solution to the data problems, we’ve identified thus far.

Market engagement and dialogue, rather the attempting the ‘rocket science’ that is  yet more  standardisation, provides the quickest and smartest way forward to the data quality conundrum and to achieving a fit-for-purpose CT.

Investigating the data and reaching market-wide agreement on CT practices such as data consistency and deferrals, in parallel to the political timeline, is an approach that is echoed by industry bodies and regulators alike, in order to make the CT a success.

To make this less of a marathon and more of a sprint, FINBOURNE has already investigated over 90,000,000 publicly available MiFID transactions’ data, firing the starting gun on the data quality issues that need resolution.

Our research, together with market engagement can also enable agreed outcomes across other data issues including that of any deferrals’ regime.  For some this area has become a battleground but there is consensus that the agreed-upon deferral period must in the end deliver transparency, while ensuring protection around illiquid instruments and larger trades.

Our practical approach remains that any tender for a CT or CTs, should only be made, once there is agreement on an improvement in the quality of the relevant transaction and reference data that is submitted to the relevant authority.

It’s a team effort

We firmly believe market practice delivers the right approach to fixing the data quality issues, in parallel to the legislative overtures. Having combed through a full calendar year of granular transactions and reference data, we have identified specific problems that can be solved by simplifying some of the definitions, to better reflect the market and provide the impetus for an industry-led solution.

Starting this process now, with market and data experts, will improve the quality, scope and efficiency of any CT, and ensure better ‘buy-in’ from end users,  leading to seamless adoption. At the same time, it can inform the legislative processes, while being developed, to create a more resilient, efficient and better-quality market mechanism from day one.

The time for engagement is now and we welcome market participants to join our Design Council, in order to have your say and support progress, as we move to the critical next step of putting a test CT into production.

For details on how to join the Design Council or to speak to us about CT, click here