ICMA has today published a report into considerations surrounding the establishment of an EU consolidated tape (CT) for bond markets. This report was produced in response to a request from the European Commission’s DG-FISMA for a bespoke study assessing the feasibility of implementing a consolidated tape for EU post-trade raw bond data.
Greater transparency in bond markets and other “non-equity” asset classes was one of the key objectives of MiFID II and MiFIR, however, in bond markets, this has yet to be fully achieved. A key reason for this is the lack of a central database, which aggregates the various raw post-trade data sources into a single view, also referred to as a ‘consolidated tape’. Instead, raw post-trade bond data (date, time of execution, reported date & time [taking into account current publication and deferral obligations under MiFID II], ISIN, price, venue, volume, amendment or cancel) is currently fragmented across the different Approved Publication Arrangements (APAs) with inconsistent presentation formats and differing modes of machine readability. Inadequate data quality poses further challenges to the data that is currently available. Lastly, there is also a noticeable unlevel playing field with respect to access to raw post-trade bond data.
Commenting on the benefits to the market of a single reliable source of post-trade data, Martin Scheck, ICMA Chief Executive said: “The goal of the bond market consolidated tape is to improve post-trade transparency, assist decision-making and provide market insights to end-investors, large or small. We believe that adoption of the appropriate structure would benefit the whole market, by providing a centralised, high quality, affordable, trustworthy data source, offering a comprehensive market view.“
The post-trade CT report, the culmination of work by a taskforce of thirty-six ICMA member firms from the buy-side, sell-side, trading venues and data providers, recommends several key elements such as: the assessment of potential governance models likely to become a successful consolidated tape provider (CTP) ‘going concern’; creation of a CTP revenue sharing scheme for APAs and trading venues based on quality of cleansed aggregated data; a balanced tiered pricing model based on usage (or proportion of usage); relevant necessary changes to level one of MiFID II to alter the CTP obligation to obtain bond post-trade data, to an obligation for venues, APAs and eligible investment firm obligation to provide it to the CTP; and finally the borrowing of a number of fundamentals from Trade Reporting and Compliance Engine (TRACE), a consolidated tape for the US fixed income markets.