When European regulators included measures for a consolidated tape (CT) in their 2018 review of the trading rulebook, it was largely met with applause. The hope was that it would bring much-needed transparency into the market, help reduce market data costs, and allow firms to better comply with new mandates rolled out after the financial crisis. Almost two years later, though, the effort has gotten stuck in the mud as nobody wants to be the one responsible for it.

That might be about to change.

In June, the Plato Partnership—a non-profit organization comprised of buy-side and sell-side institutions, including Barclays, BlackRock, JP Morgan, and Schroders—announced it was collaborating with BMLL Technologies, which provides a research service designed to recognize patterns in exchange limit order books, to develop a platform that will provide market quality metrics on European equities and equity-like instruments, free of charge.

However, according to sources familiar with Plato, who spoke to WatersTechnology on the condition of anonymity, this recent initiative could function as a precursor to a European CT.

Several of these sources attended the Imperial Plato Market Innovator (MI3) Conference on July 25, where BMLL Technologies presented on how it will design and help build a platform that will provide a consolidated view of market data metrics on European equities from all relevant venues. The service comprises 12 daily T+1 analytics on indicators such as liquidity, the European Best Bid and Offer (EBBO), closing auction analytics, intraday volatility, and trade-quote ratios

Sources say achieving some of these benchmarks, especially the EBBO, would involve or require the construction of a consolidated tape—since Plato and BMLL are building this, they say this would logically serve as a precursor to the official CT.

“[The platform] would have to say the best bid price among all those venues, the best offer among all those venues, and by doing that, you are effectively consolidating the touch price,” says a senior executive at a market structure firm familiar with the proposed platform.

As part of the Plato Partnership project with BMLL Technologies, they are also aiming to create industry standards and definitions to help with the classification of addressable and non-addressable liquidity across venues. 

• The FIX co-chair says that the consolidated tape will not make market data cheaper, as consumers will still have to buy feeds from the providers. To read more, click here.

The Plato Partnership declined to comment for this article, however, sources familiar with the organization have said it is still discussing the wider direction of the project with BMLL Technologies and expects to make announcements in the coming months. 

According to the Plato press release published in June, the platform will be available to market participants by the end of this year.

Ben Collins, head of sales and client relationship management at BMLL Technologies, says the vendor is not sponsoring a CT itself but would work with the Plato Partnership to help develop the official European CT if this becomes the end objective. However, like the other sources, he says the way the project is designed may require or involve the building of something akin to a European consolidated tape.

“For the moment, the focus is on the delivery of the portal, which will obviously have a concept of creating a European CT, because in order to be able to provide an EBBO price we need to have the European CT,” Collins says.

Defining a Consolidated Tape

Today the industry is still exploring what a European CT could look like. While there is a general idea, until there is an actual plan submitted, questions will remain. And sources say Plato will have to consider whether it would even want to come forward as an official consolidated tape provider (CTP) and be subject to regulatory scrutiny on data quality, resilience and performance.

Under Mifid II/Mifir provisions, the European Securities and Markets Authority (Esma) aims to reduce the cost of data for the industry and help to provide a service where market data is published on “a reasonable commercial basis”, “in a disaggregated format,” and also make it “available 15 minutes after publication free of charge”.

On July 12, the EU regulator issued a consultation paper that reviewed these Mifid II/Mifir provisions and set out a variety of ways for establishing a CT. Some of the considerations looked at including the type of data that should be available on the CT (e.g. equities and non-equity instruments) and the frequency at which data should be provided, such as in real-time, 15 minutes after publication, or on a T+1 basis. Additionally, the consultation paper assessed market costs and the issues that have arisen in delivering a consolidated tape, which was expected under Mifid II to be developed within two years of its implementation in January 2018.

When asked for additional information, Esma pointed to the July consultation paper. 

A press release that accompanied the release of the consultation paper notes: “…Esma has identified several clear benefits a CT could provide. In particular, a CT would provide post-trade information on the trading activity for any equity and equity-like instrument in a single place and format. Finally, the consultation sets out different potential ways of establishing a CT should the EC and co-legislators decide to do so.”

Additionally, in the statement, Steven Maijoor, the Esma chair says: “Establishing a consolidated tape in the EU has been discussed for many years. I believe it is time to decide if and how we want to go ahead with this ambitious project and ESMA is ready to provide support to the co-legislators on the right way forward.”

Industry firms are expected to submit their feedback on the consultation paper and the future of a CT by September 6, and Esma intends to submit its final report to the European Commission by December 2019.

According to a market structure analyst at a brokerage firm, in recent months Esma has become more active in trying to establish a suitable candidate to run the CT, starting with the provision of post-trade equities data.

“I think [Esma] is focusing on the post-trade data first,” the market analyst says. “I think they want to try and move quickly so it seems that achieving [a] post-trade [feed] would be the easier option before moving to pre-trade data and then non-equity instruments.”

Although an official consolidated tape provider has yet to officially come forward, one senior executive at a global market structure firm says they are optimistic that the industry will see a fully established post-trade tape of record for European equities, and potentially other asset classes, by 2021.