The European Fund and Asset Management Association (EFAMA), together with a number of its members, have written an open letter to the European Commission to encourage the introduction of a standard consolidated tape (CT) to the European market.
Europe’s introduction of CT, a high-speed, electronic system that reports the latest price and volume data on sales of exchange-listed stocks, is currently being deliberated by the European Council and Parliament.
The 17 asset managers that compiled the letter are calling for the introduction of a CT in European markets “for the continued growth and well-functioning of [the] Capital Markets Union.”
They affirm that the European Commission’s current proposals, which include mandatory contribution, a single consolidator model, voluntary consumption and CTs for multiple asset classes including bonds and equities, do not go far enough to meet current European market needs.
In the letter, they outlined: “There is a strong case for a CT on equity, bond and exchange-traded product (ETP) data, not just for fund managers who require the data to make informed trading decisions and observe best execution on behalf of their clients.
“Equity and ETP data should ideally be delivered in as close to real-time as possible, while bond data can be delivered at minute speed accommodating a different market structure which is subject to publication deferrals.”
EFAMA and the asset managers involved highlight that the logistics necessitated by the COVID-19 pandemic “accentuated the need for a tape, both in providing critical data for liquidity risk management, and also as critical infrastructure to allow trading continuity in the event of an exchange outage”.
They added: “Beyond the business as usual functionality of the tape, there is also an important competitive element to consider. One we are confronted with on a daily basis. Global investors will invest in securities in other jurisdictions (US predominantly) before bringing investment flows into Europe, due to a lack of consolidated price and volume data for the European market.
“Similarly, the CT data can also drive retail investor behaviour. Again here, post-COVID, we have noted greater retail investor participation and interest in equity markets. This nascent interest should be nurtured, and investor confidence and the ability to receive best execution enhanced through the existence of a CT. This positions the CT as a natural cornerstone of the European Commission’s Retail Investment Strategy, aimed at empowering retail investors and encouraging their participation in capital markets.”
They conclude: “The raison d’être of the tape is to support capital market functioning in the EU and thereby improve issuer and investor outcomes. It should not be designed to subsidise the operating models of intermediaries like the main stock exchanges.
“Indeed, we view the proposed operating model as a subsidy for the exchanges and not a replacement for actual lost data revenues. Currently the proposal goes in the opposite direction, compounding an existing problem around market data costs.”
Of the 17 asset managers who compiled the letter, only five wished to be named publicly, these included: Eric Boess, global head of trading at Allianz Global Investors GmbH, Fiona Bassett, global head of systematic investment solutions at DWS, and Steve Ellis, global chief information officer of fixed income at Fidelity International.
The other named signatories were Paul Squires, head of Europe, Middle East and Africa at Invesco and Brian Mitchell, global head of equities and fixed income dealing and implementation at M&G.
