Industry viewpoint : The Consolidated Tape : FIX Trading Community

WHATEVER CONSOLIDATED TAPE YOU WANT, DATA STANDARDS ARE ESSENTIAL.

The Regulators have wanted an industry led Consolidated Tape, but it hasn’t happened. Neena Dholani, Global Marketing Programme Director, FIX Trading Community explains why.

Some of the reasons why Consolidated Tape providers have not emerged include the lack of financial incentive for running a consolidated tape, the overly complex and strict regulatory environment, competition among non-regulated entities such as data vendors, and last but not the least the lack of mandated clear and open data standards. All of these are significant hurdles that must be considered in order for a consolidated tape to be successful.

But nevertheless, one of the main objectives of MiFID II was to increase transparency and it is still immensely difficult for market participants to get a complete picture of trading across venues. Known as the ‘what, where & when’ conundrum it is now clear that regulators are definitely going to do something about the consolidation of European data. The debate today is more around the type of consolidated tape and ensuring how the industry comes together to implement some of the points raised by ESMA in their consultation paper released late last year.

So, what type of tape do we need? Should a consolidated tape service be real time pre and post trade data, a real time post trade tape of record, or an end of day tape of record? There are strong supporters for each of these three options but whatever the selected choice the application of open, clear and harmonised data standards is essential for successful implementation.

In order to address the questions surrounding data standards, the FIX Trading Community launched its Consolidated Tape working group last summer, to consider the data standards element of the Consolidated Tape consultation paper. Given the difference in the operation of the Equity and Non-Equity markets two groups were established. The working groups are focusing on Equity and Fixed Income cash bonds, but leveraging use cases and trade scenarios for each of the asset classes. The group’s objective is to look at where the existing data provides challenges for market transparency; then to work towards new technical flags of how the data should be identified to aid in the creation of a consolidated tape. We are calling on the industry, the buysides, sellsides, technology firms and venues to join us and get involved with this initiative.

“Implementation of new OTC and SI data flags agreed by the experts in the FIX Trading Community should have an immediate impact on improving market transparency” remarked Graham Dick, co-chair of the FIX Equity Consolidated Tape working group and Chief Executive of Aquis Exchange Europe. “Industry experts have worked proactively to deliver technical solutions and we look forward to sharing our recommendations in 2020 with ESMA and the European Commission” he added.

The Equity working group kicked off its initial meeting in December last year and spent most of its time focusing on OTC and SI trade reporting where the current data requirements leave an element of ambiguity in the understanding of the circumstances of the trade. The group has also focused on market interpretation of what is “addressable and non-addressable” liquidity. In order to come up with an agreeable definition the working group have drawn out detailed workflows defining touch points on where a new FIX flag is needed.

The Fixed Income working group started in March this year with the same objective to deliver better quality data standards. This is to be achieved by looking at the detail of Fixed Income post trade transparency which has a much wider and diverse product range. Solving the problem at the source of publication should resolve this issue when the data is published. The working group will mirror the approach taken by the equity working group by capturing trading scenarios but very much focused on a Fixed Income outcome. The ultimate goal for the working group, collaborating with other industry associations, is to produce best practice guidelines outlining the correct way of completing trade reports that makes sense for the regulators and the industry. The output of this will be taken into the full suite of the FIX family of standards. Should this newly created blueprint be mandated throughout the industry we can then deliver a Consolidated Tape which maintains robust industry standards which work for the entire Financial Sector.

 

“The Consolidated Tape for Fixed Income needs to recognise the very different way that this asset class works. By taking time to go back to first principles, we can ensure that we can create a dataset that adds value to this sector” said Alex Wolcough, Co-Chair of the working group and founder of GreenBirch Group.

The Consolidated Tape working group endeavours to deliver its stated aim and will succeed as the industry continues to work together with guidance and co-operation from EC, ESMA and other trade associations.

The success of the FIX Trading Community working groups is a direct result of the commitment of the industry experts who bring knowledge, skills and practical experience into the mix. This can only strengthen the goals that the working groups are looking to achieve and ensure the industry have enriched data and reliable standards.

In order to work towards a consolidated tape that will provide true value to the industry, more than ever, we need the widest possible industry collaboration and engagement.

Representation from across the industry is essential and as a result all sectors will benefit.

Why should the buyside get involved in the working groups?

As a buyside trader, trading performance is becoming ever more critical to your role. The more illiquid the asset class, the more incomplete and possibly inaccurate the current dataset. Being engaged in the working groups will enable you to ensure your vision of the core data attributes and potential workflows are implemented into the standards going forward.

The provision of a robust consolidated tape with accurate standardised data will provide you with the best opportunity to optimise your transaction cost and best execution analysis.

Why should the sellside get involved in the working groups?

For the sellside it is critical to understand the data that the buyside are using to feed into their performance analytics. Being engaged in the working groups will enable you to hear directly from the buyside and understand their core concerns around data quality and also the workflows they use. This will turn enable your firms to process data which is tied into your client’s perspective.

Why should the Trading venues and APA’s get involved in working groups?

For Trading venues and APA’s, with unambiguous data you will have a better understanding of OTC flows directly from the buyside and sellside. This will ensure that your workflows and data processing are in line, and will allow you to be well positioned with the ability to implement robust future regulatory directives.

Why should technology firms get involved in the working groups?

This will give you the opportunity to engage with all your clients, and ensure your products fit their needs, it will also give you the opportunity to feed into the process, and ensure the processes that are developed do not hinder any future technical innovation.

For technology firms this critical data will form the core of your products that allow continued innovation. The access to a reliable data source will assist in enriching products in order to further improve your service.

Now is the time to get on board:

  • To learn more about the Consolidated Tape initiative, please contact EMEA co-chairs Rebecca Healey and Matthew Coupe on
    emea.cochair@fixtrading.org.
  • To learn more about the breath of work within the FIX Trading Community, please contact the Program Office on fix@fixtrading.org.

 ©BestExecution 2020

 

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