ESM CFO throws weight behind European consolidated tape

3 min read
David Cheetham

A consolidated tape for European equities and bonds that would provide enhanced transparency and aid decision-making for both investors and regulators according to Kalin Anev Janse, chief financial officer at the European Stability Mechanism.

The initiative seeks to align various markets across the European Union that still experience a high degree of fragmentation and help move the bloc towards a capital market union (CMU), the objective of a seamless securities market that can compete better with London and New York. The European Union set out its third wave of reforms in six years on Thursday Reuters wrote.

A consolidated tape would be useful pre-trade, allowing investors to glimpse in real-time where the terms of a trade are best, said Janse, in a keynote address to the ICMA secondary market forum on Wednesday.

"Critically, it would open access to data for all European tradeable entities to the rest of the world – rather like an internet search engine does," he said.

"Access to data in a consistent and transparent format, helping to encourage further financing and growth. A central data bank for all bond transactions would ensure a comprehensive, high-quality, trusted and affordable search engine. Hence a reason why all investors would be beneficiaries."

Market regulators would also benefit from a common reference point for best execution and transaction cost analysis, enabled by post-trade monitoring of cross-border transactions conducted across Europe, not just within one country.

"The problem for investors in Europe is much the same as for consumers who want to buy something they see through a glazed shop window, right there and then," said Janse.

"That is the analogy for market participants in the EU who may observe through a consolidated tape that an asset is cheaper in one trading location compared to others, but may not be able to execute on that platform."

Closer union needed

The concept of a consolidated tape is not a new one, its origins that can traced back to the US equities markets of the late 1970s and twenty years ago for US fixed income. That said, for Europe it would require a significantly higher degree of market integration than currently exists.

"Above all else, well-integrated markets are necessary to harness the potential of a consolidated tape," said Janse.

"If introduced, a consolidated tape might show liquidity for a certain bond on a given trading platform within the EU. But this liquidity will not be executable if commercial or technical ties across trading markets within the EU are weak. In the US, the consolidated tape connects trading platforms for execution."

Janse said that it is encouraging that the EU has put the CMU initiative high in the European agenda but important questions need to be addressed with a myriad of market views on the best way forward. The ESM believes a step-by-step approach to implementation of a consolidated tape would be appropriate.

"The sovereign and SSA bond segment may not be the most urgent case considering the level of transparency already prevailing in that market. The corporate bonds market might be the priority. In time, government and SSA bonds could be added to the tape. After all, consolidated means consolidated."