The top three venues in fixed income by trade volume—MarketAxess, Tradeweb, and Bloomberg—have confirmed their plans to compete for the contract to deliver the regulator-backed consolidated tape (CT) for bonds in the EU. WatersTechnology first broke the news of this partnership back in November 2021.

“With our collective expertise in fixed-income markets and in operating regulatory reporting entities—notably Approved Publication Arrangements (APAs) for Mifir reporting—we are in a unique position to deliver a reliable, efficient, and cost-effective consolidated tape service that meets the needs of market participants and the objectives of the regulators,” the three fixed income businesses wrote in a joint statement. They declined to comment on the record for this story.

The three vendors are looking to establish an independently run company that will operate separately from their core multilateral trading facility (MFT) businesses. As part of the initiative, the group is also preparing to submit a request-for-information to review independent third-party technology and operating partners for the CT service. The tech partner would be responsible for roles like data ingestion, data management, and data dissemination.

The announcement comes seven months after the European Commission’s draft proposals, published on November 25, on how the consolidated tape would operate and be delivered. The published framework shed light on some of the core issues related to the CT, such as the mandatory provision of market data from venues to the consolidated tape provider (CTP); how data quality will be governed; the review of the deferral regime; and some limited detail about how the CT revenue can be distributed, as well as the criteria for the CTP selection process.

WatersTechnology has learned that the three MTF businesses decided to go public with the venture following last year’s proposals and further clarifications given by regulators on the CT operating model.

There are several other candidates that have publicly communicated their interest in becoming the consolidated tape provider: Finbourne, Ediphy, and Propellant. Others, including Etrading Software, are also known to be considering coming forward.

A senior executive at one of the three venues told WatersTechnology in November that the firms would have an advantage over other vendors hoping to become a regulated CTP because they already consolidate the market data they ingest via their APAs and have the expertise to build a tape.

“The candidates who already have existing experience in operating APAs, in my opinion, would have much higher confidence in terms of their delivery of a CTP than those candidates that have not delivered or don’t operate an APA. The reason for that is quite simple: The technical difference between an APA and a CTP is marginal,” the source said.

All three MTFs control the majority of the volume traded in electronic fixed-income markets in the European Economic Area. Data published by the European Securities and Markets Authority (Esma) showed that, in 2019, Bloomberg, MarketAxess, and Tradeweb accounted for 84% of the fixed-income volume traded on MTFs in the EEA, which amounts to €12.6 trillion ($14.2 trillion).

Neil Ryan, the consolidated tape lead at Finbourne, says if there are any issues pertaining to competition laws or conflicts of interest regarding the three major venues coming forward as the CTP, those should be addressed during Esma’s anticipated tendering process. “Because they have current stakes in the data vendor market, they’d have to be aware of the overall competition law issues, the dominance, and stuff like that. So, I assume they’ve considered all of that,” he says.

The initiative itself is still in its infancy and the group has still to decide how a CT—run by the independent entity—will be governed, how it will be priced, and what it will fully look like.

Ryan says there is a whole host of factors to consider when thinking about a CTP’s governance structure. For instance, he says the oversight of the actual CT and the data standards should sit with the regulator, whereas the CTP itself should be focused on operational issues.

“We feel the focus should really be on operational issues, and the technology as part of that,” he adds. “But there are other things like measuring and managing the input and output of data, measuring the volumes, billing—all that sort of boring stuff—the legal [aspects] around it, the IP, the redistribution and invoicing. All those things will have to be built out.”

Right now, the group will focus on its plans to deliver an EU tape but will consider the option of putting a proposition forward for the UK tape, depending on the outcome of the UK regulatory framework. For example, the UK is currently looking at offering a multiple CTP model rather than a single CTP, an option that some market participants would worry about in terms of its viability.

However, there are still a lot of moving pieces. For one, the EU proposals have yet to be finalized and any CT candidate that comes forward will require regulatory approval from Esma.

The collective group will apply for the role of CTP through Esma’s tender process when that is made public. If successful in winning the contract, the independent company will be authorized and supervised by a European regulator to provide a commercially viable, low-cost market data service pursuant to Mifid II.

In June 2021, Lueder announced at the Fix European Trading Conference that a beta version of the EU CT should be available for testing in 2023. For now, though, it’s a game of wait and see.