CAUGHT ON TAPE – A consolidated tape for Europe

The Federation of European Securities Exchanges (FESE) today welcomed a new study on the proposal for a consolidated tape (CT) in Europe. Independently written and produced by management consultancy Oliver Wyman and commissioned by FESE, the study, entitled ‘Caught on Tape’, sets out a cost-benefit analysis of various CT options for Europe. It concludes that starting with a 15-minute delay post-trade tape would be the most favourable for issuers and investors.

The study finds that in and of itself, a CT will not bring more transparency to Europe’s markets – an objective of MiFID II. It emphasises that reforms must be made to combat the structural shortcomings which allow for the damaging extent of dark trading.

Based on the assumption that these reforms are implemented, the study concludes that a post-trade 15-minute delay CT covering equity, equity-like (including exchange-traded funds) and fixed income financial instruments “provides the best cost-benefit characteristics”.

Moreover, the study observes that a CT, if calibrated inappropriately, risks exacerbating market structure limitations and increasing costs for European capital markets. This could further disadvantage retail investors and hamper the development of the Capital Markets Union.

Among the potential technological and operational challenges for policymakers to consider, the study points to the asymmetries which exist in market data quality. It notes that “some market structure imperfections limit access to high-quality market data, specifically in less transparent markets like fixed income.”