The Consolidated Tape – It’s not easy but without standards it is impossible

Earlier this year at the FIX EMEA Trading Conference, Keynote Speaker Verena Ross, Executive Director, ESMA, discussed the fact that ESMA would be reopening the discussion around the need for quality market data and data standards. Since no consolidated tape provider had naturally emerged, ESMA would revisit the subject and if necessary, would look to mandate the provision of a consolidated tape. These discussions are nothing new as the debate around a European Consolidated Tape has been ongoing for a decade, and as MiFID II settles down, the spotlight is now shining on the finer details of the reported trades. In addition, the ability of the market to interpret those trades for analysis and the sheer explosion of data has moved this topic to the front burner.

On 12 July, ESMA asked the industry for their feedback for a European Consolidated Tape (CT). The consultation paper sought industry feedback on ESMA’s initial assessment on the development in prices for pre and post-trade data and on the consolidated tape for equity instruments. The FIX Trading Community has been involved in the roundtables hosted by ESMA, and the discussion of the use of FIX’s MMT (Market Model Typology) was featured during those discussions. FIX has recently started a Consolidated Tape Working Group where the initial objective was to respond to ESMA’s consultation paper on the areas that are relevant to the provision of clear and unambiguous standards.*

Currently, it has become apparent that multiple vendors provide different quality of data and calibrating that data across the different venues is not streamlined, which results in diverse interpretations of data. A data source from one venue could be defined very differently from another venue. Therefore, there is a clear need to standardise the definition of how to interpret the required data across different venues.

Also, of importance is where to connect to access the data. In most cases, both the Buy- Sides and Sell-Sides are connected to several venues to collect the data where some parts of data are available on one venue, and another part is available on a different venue, creating further complications. The ultimate goal is to have access to a complete set of accurate data. To date, it has not been possible to access all the data from one venue and involves collecting multiple data fields from different venues, all of which takes a lot of time and resources and can add further connectivity costs.

Several firms have been investing in new technology such as machine learning and AI to help calibrate the data across trading venues and to help constitute trade analytics and best execution analysis. The underlying challenge will continue to depend on the key source of data and how these are to be defined through a common open standard which the industry will need to adopt.

With all these challenges it is clear to those who have been working with the FIX Trading Community during the consultation period that at the heart of a successful consolidated tape will be clear and unambiguous standards that define the terms under which a trade has been executed.

Huw Gronow, FIX Trading Community, Co-Chair EMEA Investment Management Subcommittee, commented, “A Consolidated Tape is necessary to give the buy-side an accurate view on data for the purpose of running trade analytics for optimisation of portfolio construction, and currently the data is inconsistent and not standardised. FIX can help to create a set of standards and best practices in identifying the data which is required to differentiate between, for example, risk trades, SI trades and other trades or liquidity which could be non-addressable.”

Central to the FIX Trading Community’s work is the continuous development and promotion of the FIX family of standards, including the core FIX Protocol messaging language, which has revolutionised the trading environment and has successfully become the way the world trades. Over recent years, FIX has promoted a new standard in support of efficient data aggregation – known as the Market Model Typology (MMT). Through FIX Trading coordination with the financial industry, MMT has been broadly adopted and has become the de facto standard to enable the usability of consolidated equity data as a means of enhancing the transparency in European equity markets.

Guidance on the consultation makes it clear that ESMA’s ambition is to have a CT that would cover both pre and post-trade across all asset classes. While FIX supports this ambition, for the first phase, it would most likely be more effective to leverage the work the FIX Trading Community has accomplished in enabling equity post-trade transparency. The current MMT v3.04 covers both equity/equity-like and non-equity instruments and supports consistent trade flagging across all asset classes under MiFID regulation.

In our experience, industry-led solutions are a good way to provide the industry what they need, however we recognise that in order to meet the needs of the markets and the regulators, the most effective solution would be an industry-led initiative in cooperation and with guidance from the regulators. The industry is continually evolving, and any adopted standards must be flexible to adapt to those changes and continually create and develop best practices. The aim of the CT should be to provide good quality data and a comprehensive view across markets based on as close to 100% contribution as possible.

Matthew Coupe, FIX Trading Community EMEA Regional Co-Chair, commented, “From a FIX perspective we are exceptionally happy and humbled by ESMA having recognised MMT into their paper, and we are excited to work with ESMA and EC to help drive better quality data. The only way we get better quality data is through free and open standards and with Vendors, Buy-Sides and Sell-Sides, and other Trade Associations coming around the table to discuss what we should deliver and putting the right context onto trading activity.” The introduction of CT should leverage the work FIX has done to date and take advantage
of FIX’s developmental work going forward. Other commentators to the consultation paper supported the use of FIX/MMT for trade reporting. The debate will continue around whether or not a consolidated tape is a good idea, whether it will achieve its stated aim, but the one undeniable thing is that it will never be successful unless the industry works together with guidance and cooperation from the regulators. The FIX Trading Community is positioned to extend the FIX / MMT standard to support the Consolidated Tape objective.

If you would like to be involved or learn more about the FIX Trading Community, please contact

* esma-consolidated-tape-consultation-paper-fix-response/

Read the full article on Best Ex Autumn edition