By Huw Jones
LONDON (Reuters) – Banks and asset managers are vying with Europe’s exchanges to develop expertise that may deepen the pool of traders within the continent’s capital markets and higher compete with Wall Road.
The US has lengthy had a ‘consolidated tape’ aggregating inventory and bond costs from competing buying and selling platforms for traders to identify the very best offers, and the European Union and Britain search to match this over the approaching three years.
“The purpose of the tape is to democratise access to market data and to make sure that everybody is seeing the full breadth and depth of the market,” mentioned Natan Tiefenbrun, president of North American and European equities at Cboe International Markets (NYSE:), a pan-European inventory alternate.
The present “messy” and fragmented system for market information discourages traders, Tiefenbrun added.
EU securities watchdog ESMA mentioned it’ll seek the advice of earlier than the tip of Could on its standards for choosing successful bidders to run a tape for bonds initially, after which one for shares.
The 2 contenders which have emerged up to now to run an EU shares tape spotlight the tensions between exchanges and banks and asset managers over the worth of market information.
Exchanges had opposed a tape to be able to guard their profitable information, whereas asset managers and banks say there could be no information with out their trades. To carry exchanges on board, the EU has mandated alternate contributions to a tape.
EuroCTP, backed by 14 exchanges together with Deutsche Boerse (ETR:) and Euronext, is shifting early by investing thousands and thousands of euros to start out constructing a shares tape now, earlier than any regulatory nod.
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A bit additional behind, French consultancy Adamantia launched a feasibility research for a shares tape in 2021, with assist from Barclays, BNP Paribas (OTC:), Credit score Agricole (OTC:), Deutsche Financial institution, Societe Generale (OTC:) and UniCredit.
Adamantia mentioned it was securing an funding plan and choosing a expertise firm for a tape, backed by 10 buy- and sell-side establishments.
“Once we finalise this step, the objective is to form a joint-candidature … and prepare for the upcoming ESMA tender,” mentioned Adamantia companion Antoine Pertriaux.
ESMA is predicted to ask bidders for a bond tape by early subsequent yr, and for a shares tape after that.
An Oliver Wyman report for European exchanges business physique FESE estimated it could price as much as 98 million euros ($105.09 million) to construct a shares tape, however proponents say a single real-time snapshot of costs would make cross-border buying and selling in Europe simpler and lure extra traders. Solely massive market individuals with deep pockets can usually afford to get costs from the various buying and selling platforms dotted throughout the EU.
In the US, the consolidated tape digital system has been in place for many years, overseen by the Consolidated Tape Affiliation, a grouping of alternate individuals together with the New York Inventory Alternate and the Nasdaq.
OPERATIONAL PHASE
Britain can be planning for its personal tapes, overseen by the Monetary Conduct Authority (FCA).
“By building a more complete picture of the market, a tape will reinforce the UK’s position as a leading centre for the listing and trading of bonds,” mentioned Sarah Pritchard, FCA govt director for markets.
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European funds business physique EFAMA says a tape ought to serve market individuals and in “no way be used to render European exchanges’ own proprietary feeds more attractive”.
EuroCTP CEO Eglantine Desautel advised Reuters there’s a want to start constructing the EU tape given it has to knit collectively 300 buying and selling and commerce reporting platforms throughout Europe.
“We are moving to the operational phase right now, and in the beginning of 2025 will have the first elements for testing,” Desautel mentioned.
Tiefenbrun mentioned Cboe was probably curious about being a part of a shares tape within the EU and one in Britain, including there’s “nervousness” over EuroCTP.
“Will the shareholders of EuroCTP deliver what the industry wants or will their long-term interests be better served by a tape that protects their existing market data revenues?”
EuroCTP mentioned it’ll act with “full autonomy” to serve all market individuals.
Britain’s FCA is because of set out additional particulars on what a UK tape would appear like, beginning with bonds.
The London Inventory Alternate Group (LON:) mentioned a UK shares tape ought to be restricted to costs of accomplished transactions, narrower than the EU tape, which may even embody indicative “pre-trade” costs. A tape “cannot be both operationally robust and low-cost”, LSEG mentioned in a paper printed final month.
On the bonds facet, a significant EU and UK contender, a troika of Bloomberg, MarketAxess and Tradeweb, threw within the towel earlier this yr, citing complexity.
This left Etrading Software program alone for now, with CEO Sassan Danesh saying the corporate plans to bid for each the EU and UK bond tapes, citing its neutrality.
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“We are a technology company, and we are happy to make money from the technology and operations, we are not looking to make money from the data,” Danesh mentioned.
($1 = 0.9326 euros)
