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Additionally , competition considerations would need to be taken into account – smaller firms being edged out of the market through pressure to embrace the entirety of a CT ’ s offering could work against market diversity .
Deferrals The question comes down to balancing the expectations across the different players so as to allow them to coexist and mutually benefit . Though a fixed income CT focused on post-trade looks to be the most popular choice , a key factor in discussions around data access is centred on timings , with posttrade publication windows up for debate .
Paramount is the users themselves viewing the contents of a CT as inherently helpful . Added to this , in terms of sourcing the content , TV ’ s and APA ’ s – specifically their business models – must be protected to ensure cooperation , and subsequently for the delivery of the CT itself , the providers must be compensated in some way to ensure quality .
Both Europe and the UK have made clear their preference for trade reports and market data to be sent as close to real-time as is technically possible . With deferrals harmonised and a real-time approach , many believe the market may face undue risk , however a long delay may result in negative repercussions when it comes to price formation .
In terms of striking the right balance , compromises must be made , however for some market participants , even a 15-minute delay would render a tape stale and effectively useless , which would indicate that a closer look
66 // TheTRADE // Q3 2023 into margins may still be required .
In the fixed income markets , use cases for realtime data vary across the board , however , the majority of firms use this in trading operations and within trade execution . A recent study from Coalition Greenwich found that 72 % of those surveyed across both the US and Europe said they used real-time data throughout the course of the day .
The HM Treasury ’ s WMR review stated that almost all respondents supported the simplification – and standardisation – of the fixed income deferrals regime , working to increase the chance of success of a tape for FI instruments .
( Consolidated ) tape of dreams The overarching approach seen across Europe when it comes to introducing CT ’ s appears to be a Cosneresque ‘ If you build it , he will come ’ approach . However , as market commentators have continually explained , in a scenario where the stakes are so high , if conditions are unclear , adoption is a big ask
“ Our proposals allow bidders to operate on a for profit basis because we think to rule this out would unhelpfully constrain the potential range of bidders .”
THE UK FINANCIAL CONDUCT AUTHORITY
of both users and providers . Incentives are critical and for both consumers and potential providers of data and the CT itself , and these need to come with real parameters .
Lalone previously described the quest for a functioning consolidated tape as the “ white whale ” of the Mifid II framework – a relentless and complicated pursuit , inherently difficult to achieve . Theoretically , a CT could be built and ready to go and its benefits widely accepted , but the crux lies in the fact that is has so far been a concept with insufficient empirical guidance . The market is understandably cautious as belief in the success of a project has not directly translated into results thus far .
It is a balancing act , and though Brexit clearly brought with it a wave of divergence and contrary approaches , it would seem that the UK and Europe are heading in a similar , more collaborative , direction as of late .