Author: FINBOURNE– finbourne.com

Neil Ryan, Regulatory Consultant at FINBOURNE Technology, explores the renewed drive for a Consolidated Tape (‘CT’) and why FINBOURNE’s Design Council will provide a vocal platform to promote and develop the conversation in both the UK and the EU.

To say that the CT, an entity envisaged by the MiFID regime, has been long overdue, is as big an understatement as any. But what has been a slow crawl over the last two decades is now fast becoming a race, with both the UK and the EU picking up the pace to create a CT.

The current position was debated extensively earlier today, at an event co-hosted by the European Fund and Asset Management Association (EFAMA) and the Association for Financial Markets in Europe (AFME), with additional participation from DG-FISMA, DWS, Credit Suisse and FINBOURNE. As part of the discussion, there was clear consensus that transparency and market fragmentation need to be addressed urgently, with a CT filling a significant piece of that puzzle.

The journey starts here

What was made clear by the panellists is that while basic data quality issues must be addressed sooner rather than later, it needs to be done in parallel with positioning the CT, to help futureproof policy-making and improve the EU’s global competitiveness. This was echoed by others, acknowledging that there are vendors, including FINBOURNE, who can already deliver a CT with an independent view, applying cutting-edge technology to finally solve this conundrum.

Additionally, to create a level playing field and assist investors in their search for liquidity and pricing analytics, it was argued that if there is a possibility to offer a CT for one asset class before addressing all asset classes, then that should be explored (it is interesting to note that this is the approach the UK is understood to be taking, moving towards a Fixed Income CT).

Whatever the approach, the creation of a CT will need to be reactive to the legislative direction taken in both the UK and the EU.  However politics is only part of the equation and while the external regulatory landscape is in flux, an equal focus is necessary on the data itself and how a CT will start to operate in practice.

We believe data accuracy and end-to-end market transparency are two pillars, that can liberate and empower firms to move away from opaque and costly investment processes – providing a new solution for an old problem, that cuts out the operational pain.

And while others have acknowledged some of the data challenges impacting a CT, in true engineering form, we’ve decided to grasp the nettle and investigate where the real pain exists today.

Today, our flagship platform – LUSID – already has the data processing power required to operate a CT.  In fact, we’ve already built a database of more than 41 million transactions across all asset classes over the last six months, to see what a CT could look like. Using our investment data management platform, we’ve applied structure to the current issues around data quality – aggregating the data consistently and correctly. In short, we’ve solved the challenge of consuming the disparate sources, configurations, feeds and formats that are challenging the market today.

As part of this exploration, we’ve also identified wider data requirements that will need to be addressed. For instance, we believe by using a data-driven approach a CTP could help to recalibrate, and potentially harmonise  the financial markets, while optimising transparency and ensuring investors are able to assess liquidity conditions with confidence.

The issue of data standards is also one that will need to be clarified, irrespective of whether the CT takes a commercial, stakeholder or regulatory approach. Here we propose publishing CT data in whatever format has been mandated, or where no one format is mandated, we recommend the CT provides a variety of buy-side industry standards, such as utilising FIX protocols.

Continuing the journey with the FINBOURNE Design Council

As the next step in our journey, we are creating a Design Council to help bring market stakeholders together, building on the positive discussions we’ve already had, including today’s EFAMA/AFME event.

We want to shape and develop the discussion around a CT in both the UK and the EU,  to develop solutions to the data-related issues and concerns that challenge the market and hinder progress.

We believe that a Design Council can:

• Provide a safe and neutral place to discuss the practical implementation issues
• Attract market participation to encourage a stakeholder-led service to be built over a 6 month period
• Allow Members to examine the data analysed, to determine issues relating to quality, consistency and coherence
• Facilitate refinement of any prototype developed and test it to ensure it is fit for use within that timeframe

A Design Council, made up of experienced and knowledgeable market practitioners, could prove instrumental in defining structures, governance and processes around a CT, as well as issues relating to data quality to create new standards.

We also want to learn more clearly, the use cases and discuss the business and commercial frameworks, which are not yet agreed between authorities and market participants.

If you’d like to engage with us on the above discussion, or put yourself forward to join the Design Council and be part of the conversation, get in touch with us here.