In response to the Financial Conduct Authority (FCA) announcement that it would consult the industry on reforms to improve markets and boost competitiveness, including a consolidated volume for the UK, Adam Farkas, CEO of the Association for Financial Markets in Europe (AFME), commented:
“The UK Financial Services Authority today provided further details on how it intends to make UK markets more competitive, including a focus on a single consolidated band provider per asset class. This is a welcome move as it will help keep associated data costs as low as possible while counteracting the current fragmentation of post-trade transparency data. A single consolidated tape vendor will also be easier for the official sector and industry to monitor.
“AFME supports the development of consolidated tape and its role in improving data quality. However, we recognize that even a properly constructed consolidated volume cannot fully handle the current unacceptably high cost of market data. We trust that the FCA’s extensive work on wholesale data will help eliminate anomalies in this area that are detrimental to financial markets and their users.
“Open and constructive dialogue with industry stakeholders is an important process in developing quality regulation, which in turn fosters strong and healthy financial markets and ultimately growth.”
AFME advocates evidence-based policymaking and we support the rigorous approach the FCA has taken to cost-benefit analysis to support its policy positions.”
AFME’s position on the development of a consolidated band in the UK is as follows:
- A a single independent consolidator for each asset class (ie stocks and bonds) is appointed.
- The consolidated volume is offered at fair and reasonable price levels for professional and non-professional users or ensure that it is commercially successful.
- The consolidated tape is sold with it a simple framework for data licensing in the single market covers a wide range of use cases.
- Involving industry stakeholders The data quality is discussed In parallel with the development of the consolidated tape, the FCA has the power to monitor and enforce the quality of data provided to consolidated tape providers.
- Mandatory contribution of all venues to the tape is required.
- There is no consumption requirement of the consolidated band.
- On the Bond Consolidated Tape, The consolidated post-trade tape ensures that committed liquidity providers are not exposed to undue risk, particularly when trading illiquid instruments or transactions above a certain size, as in such cases relatively long periods of time are available for trade settlement or hedging.
- On the Equities Consolidated TapeThe consolidated band includes an ambitious level of pre- and post-trade data. This tape should be continuous and work in real-time to ensure that it gives users a complete picture of the market while remaining commercially viable.
AFME looks forward to analyzing the details of the papers and working with the FCA on this fundamental issue.
Source: AFME
AFME welcomes today’s announcement by the Financial Conduct Authority (FCA) that it will consult the industry on reforms to improve markets and boost competitiveness, including a consolidated volume for the UK.
Read AFME’s position here: https://t.co/p4iLnsUfXl pic.twitter.com/ycrXTCuB3K
— AFME (@AFME_EU) July 5, 2023
The financial regulator proposes further reforms to improve markets and boost competitiveness
The FCA has announced a series of measures designed to help strengthen the UK’s leading position as a global and dynamic financial centre.
To help all investors make better, more timely decisions, the FCA is proposing the establishment of a Consolidated Tape (CT) to provide them with clear, cost-effective trading data.
A CT combines multiple trading data sources into one information stream. This will increase transparency and access to trading data by reducing costs and improving data quality.
The FCA proposes a CT for bonds first, where the UK has a leading global market, followed by equities.
The FCA intends to conduct a tender process to nominate a single bond CT provider.
As part of the Edinburgh Reforms, the FCA is working with the Government to deliver the regulatory framework up to 2024. By providing a more comprehensive picture of the market, a CT will strengthen the UK’s position as the leading center for the listing and trading of bonds.
The FCA will consider further reforms to the transparency requirements for bonds and derivatives later this year, with the aim of creating a simpler and more effective system which, alongside the CT, will improve the content and delivery of trading data in UK markets.
Other FCA announcements today will support wholesale markets and overall competitiveness:
Notes on the scope of the trading venue
To further support innovation and the development of new technologies, the FCA has issued guidance addressing questions from market participants to level the playing field and inform companies when they may need a trading venue admission. The guidelines will come into force in October 2023.
Support for businesses expanding to and across the UK
Building on the existing support for newcomers to the financial services sector, the FCA is introducing a new Pre-Application Support Service (PASS) for overseas wholesalers and their advisers looking to expand into the UK, i.e. firms already based in the UK but planning a branch in the decentralized countries and outside of the Southeast as well as those with innovative, complex or high-risk business models.
The service will see increased support from July, including pre-application meetings and the opportunity for FCA speakers to speak about the wholesale firm authorization process at industry events, roundtables and conferences.
said Sarah Pritchard, Executive Director of Markets and Executive Director International at FCA:
“We are adjusting our rules to ensure the UK market works well, to give businesses certainty and so create a good environment for investment.”
“The new consolidated band will help reduce trading costs, increase transparency and improve data quality.”
“Our other actions announced today aim to provide further support to the UK’s thriving financial services sector.”
Source: FCA
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