A consolidated tape, bringing together all available data on securities, will make markets more competitive and transparent. The FCA should bring it forward now, says Giovanni Cespa

Transparency in market data is universally seen “as a good thing”. However, moves to develop and implement a tool that will address a glaring lacuna in market data transparency have been painfully slow in both the UK and the EU.

The Financial Conduct Authority pledged last year to publish tender documentation for development of a ‘consolidated tape’ by the end of January, but has since pushed back the deadline. 

A consolidated tape is a centralised feed of data that aggregates information on the available prices and volumes for the securities that trade in different venues. It can provide information on trades before they occur and/or on completed deals (pre- or post-trade tape). 

European markets (including the UK’s) have needed such a tool since  implementation of the Market in Financial Instruments Directive (MiFID) in 2007. 

MiFID made redundant the so-called “concentration rule”, allowing the trading of a stock away from its original listing venue, thereby encouraging competition for trading services. This has created many, dispersed trading venues where the same security is available at potentially different prices (and in different quantities). So, in the absence of a feed that aggregates such information, market participants can miss out on profitable opportunities. 

Theoretical and empirical analysis has shown that better pre-trade transparency reduces trading costs, increases liquidity and allows investors to better assess how well their brokers are fulfilling their requests.

The Financial Conduct Authority (FCA) has been consulting with market stakeholders about the technical aspects of developing a consolidated tape. 

It wants to implement a pre-trade tape by mid-2028 but the tendering process has not gone entirely smoothly – and the tape will initially only apply to bond markets. It is still considering how to deliver one for equities and ETFs.

Levelling the playing field

The FCA is clear about the value of the tool in levelling the playing field around market data.