MiFID II: Towards a consolidated tape in Europe

Abstract

On 8th December, 2010, the European Commission produced its Public Consultation Document on the ‘Review of the Markets in Financial Instruments Directive (MiFID)’. One area at the forefront of this review is the issue of having a consolidated post-trade tape that is now featuring strongly in the discussions. The failure of MiFID to establish a consolidated source of post-trade data in parallel with the firm rise in the number of trading venues has hit the buy-side firms and brokers in a number of ways. This paper describes the problem of having data fragmentation in terms of achieving best execution and the high costs of getting a consolidated view of the market, and the need for a consolidated tape in Europe. A consolidated tape would bring greater price transparency, improving price discovery. It would also provide cheaper access to pan-European data. The Commission suggests three options for the model that could be adopted for the consolidated tape. The first is an industry-led solution, prescribing in MiFID the conditions that should be met for the provisions of a consolidated tape and then allowing competing providers to provide the consolidated tape, if they meet the set of required conditions/criteria. Two other models are mandatory: one option with the formal consolidated tape to be operated by a single, non-profit seeking entity, established and appointed by legal act; and a second option with the formal consolidated tape to be operated by a single entity, which would be a commercial undertaking that is appointed following a public tender.