EFIS 2010 Keynote: Citi's Vensel - European Consolidated Quote Tape ‘Unnecessary and Complicated'

The European Commission should mandate the creation of a consolidated tape of post-trade European equity data to address unintended consequences of its MiFID regulation, but should allow market forces to continue to govern the supply of real-time, pre-trade data, said Citi managing director of EMEA electronic trading Jack Vensel, who delivered the keynote speech at Inside Market Data's European Financial Information Summit.

Though MiFID has prompted more competition between trade execution venues, Vensel said the proliferation of market data sources of varying quality - resulting in the unintended consequence of lower quality and higher costs for pan-European data - has meant that firms are "having a harder time than ever figuring out what the actual price is" for each stock, and are paying more to obtain a consolidated view of European data.

And while the solution to these problems should be "a balance between market-based initiatives, competition and regulation," he suggested that regulation should play a prominent role, given the competing commercial interests at stake, and that any revised regulation must be "properly written, targeted and effective" to "limit unintended consequences."

The goal of those rules would be to create a European body akin to the US Consolidated Tape Association to provide consolidated trade data-from all exchanges, multilateral trading facilities, dark pools and OTC trade reporting facilities-to the market at marginal cost, and to be responsible for the quality of that data, which should be time-stamped and reported in real-time, with each trade identified by the venue where it took place.

Such a solution would satisfy requirements for consolidated market data from retail investors, private client advisers and institutional fund managers, who need a clear picture of the overall market to measure their trade execution quality but do not require low-latency feeds.

"When it comes to trade reporting, we do not have a standard unit [of measurement] right now. Without one, measuring best execution across venues and markets is difficult, if not impossible," Vensel said.

While a consolidated tape could help solve this problem, it would not necessarily impact the revenues of exchanges and MTFs that supply low-latency feeds of pre-trade data and other value-added data products and services to trading firms, as firms will continue to source real-time feeds of pre-trade data from the venues they connect to directly.

"Post-trade data needs to be all-encompassing to be meaningful. The consolidated quote doesn't need to be. Trying to create a real-time consolidated quote across Europe is unnecessary and complicated," Vensel said. "If I want to plug into the exchanges and MTFs directly, I should continue to do that, and they should be able to continue to charge me whatever the market will bear for that privilege."