EC set to phase-in consolidated tape rollout

Isda AGM: introduction will start with fixed income, then move to equities and OTC derivatives

european commission headquarters

The European Commission plans to phase-in the introduction of a consolidated tape for cash and over-the-counter derivatives trades, as it looks to enhance post-trade transparency in Europe’s securities markets.

“We are addressing the complexity of post-trade transparency with a project of consolidated tape for equities, fixed income and for potentially derivatives and exchange-traded funds. We don’t want to introduce it [for all assets classes], so this will be phased in over time,” said Tilman Lüder, head of the securities markets unit at the EC.

The EC plans to introduce the tape for the fixed income market first, then equities, which will then lay the groundwork for OTC derivatives, Lüder added.

He was speaking on a panel at the International Swaps and Derivatives Association’s annual general meeting in Madrid on May 11.

Last November, the EC released a draft text of proposed amendments to the European Union’s Markets in Financial Instruments Regulation (Mifir), with the tapes being a key plank of the commission’s efforts to boost the EU’s capital markets.

The tape would comprise core market data fields including the transaction, its timestamp, an instrument identifier and the trading protocol that was used.

The phased approach taken by the EC could be welcomed by market participants, after a leaked document revealed that at least four European Union member states have called for a delay to the introduction of a consolidated tape for OTC derivatives.

In comparison, UK-based market participants are not so sure that a consolidated tape would be as viable if the country adopts a model that allows for competing providers to come forward, rather than allocating a single vendor as provider of the tape.

Standardisation aims

The need to improve transparency for derivatives market data was echoed by Caroline Pham, a commissioner for the US Commodity Futures Trading Commission (CFTC).

“There are concerns that people are struggling with the quality and usage of the data, and we are looking at improving that through more standardisation,” she said, speaking on the same panel.

“There has been some misaligning with the timing of the US rules and other global regulators, and we are looking to rectify this.”

Internally, the CFTC is also looking to boost its ability to analyse the data it receives from regulatory reports.

In a keynote speech earlier in the day, CFTC chair Rostin Behnam said the agency is looking to utilise natural language processing to convert regulatory reports that come in different formats, into structured data that can be more easily tracked and analysed. Rule-makings will also be fine-tuned to allow reports to be more easily analysed.

“Machine learning will allow us to perform pattern recognition, as it has already for our spoofing dashboard, for other types of market manipulation in support of our enforcement efforts. These will all be built on our cloud repositories of data so we can expand or contract based on need, allowing us to more efficiently allocate funding and other resources,” said Behnam.

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