ESMA recently closed the consultation for regulatory technical standards that will define the competitive selection process for the consolidated tape, as well as the technical abilities that  applicants will be assessed on.  In its response for the buy-side, EFAMA stressed that a robust governance framework for the operators of the tapes is critical.

In the past, EFAMA has been a persistent voice calling for the establishment of consolidated tapes for equity/ETF and bond data.  The use-case for the consolidated tapes (CTs) has always been clear: Europe’s fragmented capital markets have been marked by a lack of complete and accurate data on European trading activity. Some asset managers were able to, at significant cost, build in-house data solutions to cleanse and aggregate data, others had to operate on incomplete market data. 

There is no doubt, therefore, that the CTs will democratise access to market data, including to retail investors, and that they will contribute to a  fairer and more efficient use of resources within the EU. They will also improve the attractiveness and competitiveness of our markets by providing global investors the confidence they need to invest in Europe through a “golden source” of trading data.

As managers of institutional and retail capital, asset managers feel that the stakes with the CT are high. Given that effective competition is already lacking in the market for trading data, it is imperative that the CT is, from its inception, able to provide data on a reasonable commercial basis , and is representative of broader stakeholder interests.

Leaning on the US’s experience with over 40 years of managing a CT, the governance of the CT provider will be absolutely critical, especially considering that the tapes will go through various growth phases where data quality improves, user base expands, technology evolves, and regulatory requirements change.

We strongly urge ESMA to mandate a governance model that moves beyond an ‘’advisory board’’ to a full-fledged board with voting rights for a representative cross-section of stakeholders, including the user community. This board would, inter alia, decide on pricing policies, fee structures, licensing policies, and speed and connectivity. 

Tanguy van de Werve, Director General at EFAMA, commented: “Given that we are ever closer to the launch of bond and equity/ETF tapes in Europe, we are thinking ahead about how to futureproof the tapes. How do we ensure that conflicts of interest do not arise, that the tapes continue to meet the needs of a wide range of users, and that fees remain competitive? A robust governance framework with a stakeholder driven board is the best way we can think of to avert any of these negative outcomes.”

Source: ESMA