A Consolidated Tape for European Bond Markets

A Consolidated Tape for European Bond Markets

Ediphy's ethos and principles made it an inevitability they would seek to create a consolidated tape for European bond markets

Author: Ediphy – ediphy.io


Sometimes, a challenge aligns so closely with a company’s ethos and principles it becomes almost a duty to accept. By developing a prototype of a post-trade consolidated tape for European bond markets, we’ve gained a showcase for Ediphy Analytics and, more importantly, an opportunity to demonstrate our belief in fairness, transparency and democratisation.


Industry insiders will recognise the concept of a consolidated tape. Major US exchanges, for example, embrace this digital ‘ticker tape’ and FINRA’s TRACE shows the benefits a consolidated bond tape can bring. A European consolidated tape was discussed in MiFID II consultations. Until now, however, no one had taken up the challenge.


Liz Callaghan’s excellent overview for ICMA lists several reasons why a consolidated tape for European bond markets has not emerged. Significantly, however, she notes “widespread demand from market participants” and describes a host of potential benefits. For Ediphy, the most important is “levelling the playing field” for access to information.


The European Commission’s legislators assumed a ‘voluntary’ establishment of consolidated tape providers (CTPs). Instead, data providers developed proprietary (and profitable) solutions. Many of the market’s biggest players now offer aggregated data products. Our ambition is to develop a utility model delivered on a cost-recovery basis to benefit all market participants.


Why? Surely we should pursue the most profitable approach. Building a consolidated tape is no small endeavour, after all. Trading venues and APAs are not exactly in limited supply. Then there are data access and consistency issues to overcome. We’ve embraced these challenges while developing an integrated trading solution.


Naturally, our ambition is to achieve success for Ediphy Group. I take my  responsibility to shareholders very seriously. But our ethos extends beyond the pursuit of revenue for its own sake. The ‘success at any cost’ model has damaging consequences. As eyewitnesses to industry failures, we pursue a better way.


Principles and purpose hold equal value for Ediphy with the pursuit of profit. The outcomes are the same: growth, reward, return on investment. Our methods, however, differ significantly. A focus on levelling up, achieved by developing tools that empower all market participants, offers a clear vision for a fairer future.


Our standards are embodied in our practices. These too generate tangible outcomes. The Dutch Authority for the Financial Markets shares our deeply held beliefs in fairness and transparency, and we welcome their openness to address the impediments to producing a post-trade tape. We expect other European regulators will have a similar interest.


The democratisation of data is central to our belief in fairness. Solutions that mimic a consolidated tape account for a multi-billion dollar industry. The biggest players, able to call upon the greatest resource, strengthen their position. Smaller businesses, struggling to enjoy the same visibility, face a tougher search for liquidity.


Our belief in transparency aligns with our belief in democratisation. The ability to make all trade data accessible from a single location is of clear, universal benefit. Entrepreneurship gets lost in the endless digital corridors of innumerable trading venues. Opportunity and the cost of access are often too closely aligned.


The broad scope of our ambition – a vision for a fairer future for capital markets – is supported by our embrace of innovation. Our transformative technology turns our principles into practice. The holistic approach that underpins our integrated trading solution has shaped our development of a consolidated tape, too.


Happily, empowerment is a two-way street. We have reached a stage in the development of our consolidated tape where we need data consumers to join us in a collaborative initiative. In return, they will receive early access to our prototype, and their feedback will help to shape its final form.


The benefits of a consolidated tape for European bond markets are clear: a centralised, accessible and affordable solution will increase the depth of liquidity, strengthen price formation and enhance best execution. The strategic advantage for the territory is greater still: transparency can only increase its attractiveness for issuers and investors.


Building a prototype to develop a consolidated tape for European bond markets represented a clear opportunity for Ediphy Analytics to put a stake in the ground for democratisation and efficiency. The complex technical demands and the advantages to fairness made it a challenge almost with our name printed on it.


Our willingness to develop a utility identified as advantageous seven years ago provides the clearest evidence of our ethos. While other institutions develop proprietary solutions to universal challenges, we will develop technology for the greater good of the market, inspired by a vision of fairness, transparency and democratisation.


Simplicity is central to our Ediphy Markets trading platform, which offers an integrated alternative to the fragile orchestrations of legacy systems. Simplification is part of this initiative, too: a consolidated aggregation of the trades reported by myriad trading venues and APAs, accessible from a single provider and a single location.


We return to opportunities and ethos. When a project is presented that advances the principles of your business, you should take it, even if its immediate advantages aren’t easily described on a balance sheet. The longer-term benefits of aligning your company with positive change outweigh the short-term pursuit of revenue.


The evolution of an industry demands investment from every participant. Further benefits from our prototype consolidated tape lie ahead in the collaboration that we anticipate in the final stages of its development. To discover the precise form of Liz Callaghan’s accurately observed “widespread demand from market participants” will be illuminating.


We have gained valuable experience from collaborating with AFM too. My previous role as Global Head of Fixed Income at UBS provided regulatory insights from the perspective of a major institution. This project has increased my appreciation for the subtlety demanded in achieving frameworks that inspire entrepreneurship while protecting integrity.


Finally, we have proved our technical rigour in overcoming a raft of data access and quality issues. I’m delighted that Ediphy has accepted a challenge so long avoided and look forward to delivering a solution that will truly advance the cause of fairness, transparency and democratisation in European bond markets.

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