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have vehemently opposed the CT , pressing at every stage to derail or delay introduction of the CT , and to compromise its commercial viability by limiting its content .
Despite this opposition , both the EU Council and EU Parliament have been more ambitious than the EC , recognising the importance of a real-time tape and of including pre-trade data . The Parliament has currently proposed a preand post-trade real-time equity CT , while the EU Council ’ s less attractive compromise is for a real-time post-trade equities CT that includes with each trade a snapshot of the EBBO at the time of execution . While a retrospective EBBO snapshot is not something participants will be able to act upon , it would at least require a CT provider to receive and process real-time quotes from which such snapshots will be generated , simplifying the path to subsequent dissemination of true real-time quotes .
We cannot stress enough the importance of including true real-time pre-trade data : For the tape to be economically viable it must offer institutional investors an attractive alternative to purchasing data from each venue individually . For it to encourage greater retail participation in EU markets , it needs to make realtime prices easily accessible to a broad audience . And to improve the resilience of our markets to technical outages , it needs to ensure ongoing transparency to market prices and the status of individual venues .
Niki , what are some of the other implications of the EC ’ s initial proposal for an equities CT ,
Nick Dutton , chief regulatory officer , Cboe Europe
in particular around revenue distribution ? The EC proposals are clearly an important step forward in the creation of an equities CT , however we believe the amount of work required to establish and oversee the CT has not been fully thought through . In Market Structure Partners ’ study into the emergence of a CT in October 2020 – which was commissioned by the EC - we advocated for a fully-fledged organisational layer between ESMA and the CT provider to manage the process . We still believe that is necessary .
The other area of ongoing controversy is around revenue distribution . The EC originally proposed a minimum revenue target for the CT provider to meet , and also that only regulated markets ( listing markets ) would be compensated for providing their data to the CT provider . Even though pan- European MTFs and APAs would be required to make their data available to the tape provider , they would not be eligible to receive any of the revenues generated . Taking Cboe Europe as an example , it would be providing 50 % of the data to a consolidated tape provider – by virtue of being both a leading venue and the leading OTC trade reporting service – but would be receiving none of the revenues . This highly discriminatory approach was one of the compromises the EC offered to win the support of exchanges .
34 // TheTRADE // Q4 2022