Link: CP23/15: The framework for a UK consolidated tape

Link: UK Finance response

Our response sets out UK Finance members’ views on the Financial Conduct Authority (FCA) proposals for a bonds consolidated tape (CT) framework and the initial FCA discussion points on an equities CT which will be fed into a separate consultation paper on an equities CT expected in 2024.  

In August, we provided technical comments to HM Treasury regarding its draft Statutory Instrument (SI) on the amended Data Reporting Services Regulations (DRSRs) that applies to data reporting service providers including consolidated tape providers (CTP). The amended DRSRs provide the FCA specific powers to run a tender process and include other amendments to facilitate the emergence of a UK CT.

As detailed in our June blog on this topic, an appropriately modelled and fairly licensed consolidated tape will accrue multiple benefits to market participants by primarily improving market integrity and by strengthening consumer protection and effective competition.  Widened access to market data could also attract more domestic and international investment which will in turn deepen liquidity and strengthen international competitiveness of UK markets.

Our response

The FCA proposals are largely in line with those put forward by UK Finance members. The proposals try to strike a balance between different, and at times, competing considerations to ensure that the CT is commercially viable and will lead to a reduction in the cost of accessing market data.  

Below are the key principles that should underpin a CT framework to achieve its expected outcomes which are further explained in our response.

• A single consolidated tape provider: A single CTP per asset class through a competitive tender process.
• Mandatory contribution of data: Mandatory contribution of data free of charge by trading venues and approved publication arrangements to the CT.
• Timely implementation of the new bond transparency regime: Given the connection between the transparency regime and the CT, the FCA should ensure that it provides sufficient time for the design and implementation of the new transparency regime to avoid a compressed timetable whereby the transparency and the CT for bonds each go live within a very short space of time to each other.
• A simple licensing framework: A simple licensing framework which clearly defines the scope of direct use and re-use licenses which will not only encourage the take up and commercial viability of the CT but will also promote competition and innovation. Our response set out examples of use cases that should be included within each license type.
• High quality data offering. While price is an important criterion for ensuring low market data costs, use of the lowest price as the sole determinant in the second phase of the tender process could risk awarding the tender to a bidder who merely offers the core CT service at the lowest price. Therefore, in addition to the price, the FCA should consider the chosen bidder’s ability to deliver the highest quality core and value-added services.
• Governance: A consultative committee to advise the CTP, consisting of representatives from users and data contributors with a rotation of members. Publication of agendas and minutes to ensure that feedback from committee members is reflected in the continuous improvement of the CT.
• Pre-trade data for the equities tape: The equities CT, should include pre-trade data with at least three to five levels of depth to achieve the expected outcomes of a CT including price formation and market resilience.
• Revenue sharing: In principle, we are not in support of a revenue sharing as it is likely to increase the costs and complexity of an equities CT and could make it less commercially viable. However, in our response we have set out several principles on which any revenue sharing model should be founded, if the FCA decides to go ahead with a revenue sharing model.

What’s next?[1]

• December 2023: Publication of the FCA policy statement and finalised rules on the framework for a bonds CT.
• 2024: Once the rules for a bonds consolidated tape are finalised, the FCA will publish a tender document for the selection of a CTP in 2024. We also expect a consultation regarding an equities CT in 2024.
• Summer 2025: Implementation of the changes to the bond transparency regime.
• Summer 2025: Considering the time needed by the FCA to select a provider through a tender process (approximately six months) and then to authorise it, a bond CT is unlikely to be ready to operate before the summer of 2025. 

We look forward to further engaging with the FCA as it progresses with plans for a tender process and as it further considers the framework for an equities CT.

Please contact avanthi.weerasinghe@ukfinance.org.uk and alastair.campbell@ukfinance.org.uk if you would like to know more about UK Finance’s work relating to this important initiative.