Startups vie with potential EU consolidated tape to fill market data needs

Market data: Everyone wants it; nobody wants to pay for it. And in the fragmented European bond markets, expense is only a secondary battle to the quality of data available.

In recent years, a constellation of tech startups has emerged to fill a bond market data void, created by the absence of an EU consolidated tape for debt securities. Even the enactment of Mifid II did little to establish transparency in the post-trade data landscape, with data scattered across the Approved Publication Arrangements (APAs) it mandated.

Now faced with the proposed consolidated tape offering from the top three venues—Bloomberg, MarketAxess, and Tradeweb—market participants could have more potential solutions to their market data woes than ever. But the fundamental question will remain the same as it is today: Who can offer the best data product for the lowest cost? The answer likely will vary.

Audrey Blater, head of risk and financial markets regulation at Coalition Greenwich, says market participants view the forthcoming European consolidated tape as a supplement to other market data sources that are already available.

“I don’t know that it solves the market data problem. It’s probably good academically and for things like that. But for somebody who’s in the market trading, I don’t think they’re going to rely on it the way they don’t really rely on Trade Reporting and Compliance Engine (Trace) data. Instead, they’re getting real-time evaluated pricing or real-time axes or runs or other information.”

Five months ago, European startup Glimpse Markets, which bills itself as a network of buy-side institutions pooling bond trading data, went live with a handful of participants. Founder and CEO Paul O’Brien says the number of buy-side shops contributing data sits at 15, and he expects to round out the year with at least 20 members. Contributors submit their data anonymously and receive an aggregated dataset back while being compensated for their contributions on a pro rata basis.

O’Brien says Glimpse’s dataset will become statistically significant for the market if it breaches the threshold of 25 to 35 asset managers, and after that, the company’s goal is to reach triple digits.

Does the prospect of a consolidated tape hurt Glimpse’s odds of success? O’Brien doesn’t think so. With the tape’s tender process not expected to begin until late 2023, startups like Glimpse have a window of time, however brief, to make themselves a part of the solution in a market where implementing one-size-fits-all solutions is difficult.

With the tape still likely a couple years away from being operational, O’Brien says there are several question marks remaining about its cost, its model, and what valuable data will be published near-real time vs. delayed.

“I certainly think the consolidated tape is a good thing for the market. I hope it happens,” O’Brien says. “At some point in the not too distant future, I still think we’ll be in a really strong position. And ultimately, I think the idea of buy-side data sharing is something applicable to any market where transparency is an issue or data cost is an issue.”

With that, O’Brien adds that in the future, Glimpse may look to extend its own model beyond corporates and emerging markets.

Other startup tech companies that have sought to fill the European market data void include Ediphy, Finbourne, and Opensee—all of which are under consideration to become the official tech partner of the Tradeweb, MarketAxess, and Bloomberg consortium. And though only one will be chosen, the others, along with Glimpse, should be left in a fairly good position, says Greenwich’s Blater.

In the case of Trace in the US, market participants often report their Trace data to Finra through various analytics and reporting platforms offered by fintechs, making those fintech companies “the pipes,” she says. She expects to see something similar happen to these contenders once the tape is established.

“I think that leaves a whole world open for folks to do things with that data. You saw companies come in and do things with Trace data like develop DV01 statistics or sector analysis, liquidity metrics, or data aggregation for pre-trade information,” Blater says. “What I’m saying is I think there’s enough room for all these folks to jump in the pool and do different things.”