By Q4 2021, the European Commission is expected to propose to the European Parliament and the European Council legislative changes that will support the establishment of a posttrade consolidated tape (CT) for equity and equity-like instruments. In support of this, DG FISMA awarded a tender for a study on the creation of an EU CT to Market Structure Partners. The study recommends a real-time pre-trade and post-trade CT with the following structure:
- An equity real-time (milliseconds) order book feed (3-5 levels of depth) across each market with the potential to create a volume-weighted best bid and offer (BBO) of each tradable instrument, as well as action imbalance data;
- A real-time post-trade feed in equities and fixed income; • Session statistics; and
- Session admin messages and events feed.
FESE believes that such a recommendation, and in general a pre-trade CT for equities, would be detrimental for capital markets due to the difficulties in identifying a clear use case that would justify its significant costs. A CT as defined in the study would become a flawed and easily gameable best execution benchmark. A post-trade real-time CT would also be concerning because EU markets are significantly fragmented and heterogenous in terms of data quality. Given this fragmentation and its resulting technological hurdles, real-time post-trade consolidation would imply large costs and inefficiencies.
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