A European group representing banks and brokers including Goldman Sachs Group Inc. (GS), Bank of America Corp. (BAC), Deutsche Bank AG (DBK) and UBS AG (UBSN), said it supports a new plan to improve consistency in the reporting of stock transactions and is seeking greater involvement in the effort.
The Association for Financial Markets in Europe said the COBA Project, which creates a commercial and technical framework to deliver a so-called consolidated tape in Europe by the middle of next year, is “welcome.” Still, the project needs “to quickly establish broad representation from across the market,” Stephen McGoldrick, Chairman of AFME’s Securities Trading Committee and Head of Market Structure at Deutsche Bank, said in an e-mailed statement.
Last month, FIX Protocol Ltd., the London-based organization that owns the global messaging format for financial trading, published a set of European guidelines on how trade reports and market data should be consolidated to improve price transparency for equities.
Days later, Graham Dick, former head of business development at Chi-X Europe Ltd., and Mark Schaedel, former global head of market data at NYSE Euronext (NYX), published plans based on the FIX proposals -- called the Coba Project -- detailing costs, a revenue-sharing model and how the proceeds could be administered.
“The current over-the-counter reporting is in need of revision and we will work with the buy side to finalize a solution,” McGoldrick said.
Coba has proposed itself as the consolidated-tape administrator to manage the revenue-sharing process. The administrator would also license the tape to vendors that want to distribute it and come up with rules to govern those who contributed to the tape. Dick and Schaedel said they set up the project about six months ago.
The plan is also based on the Federation of European Securities Exchange’s work on Market Model Typology which gathered exchanges, alternative trading systems, and data vendors including Bloomberg LP, the parent of Bloomberg News, to set up technical standards around identifying and flagging trades.
“Our hope is that, with support from regulators, we can adopt a new taxonomy by the end of 2013,” McGoldrick said. “We are confident that this will provide the clarity required to make clear the scale and nature of over-the-counter trading and thus allow for policy formation based on facts,” he added.
Alternative trading systems such as Bats Chi-X Europe, which accounts for more than 25 percent of pan-European stock trading, came into being after new rules in 2007 opened the door to competition with traditional exchanges. The new entrants grabbed market share, driving down trading and clearing fees, and brought improved trading technology.
Even as these new venues took market share from exchanges, fees for market data haven’t fallen. Also, incumbent exchanges continue to provide the reference price for stocks listed on their markets. This has fueled calls for a consolidated tape that takes into account market data from all the trading systems to provide the price for a given stock.
Developing a consolidated tape is part of an overhaul of European trading regulations adopted in 2007 to spur competition between venues, the Markets in Financial Instruments Directive, or Mifid.
Regulators are in the midst of Mifid II, seeking to create a data feed that shows the price and volume of individual stock trades and where among dozens of venues they occurred. There are three approaches being considered: a commercial plan with competition between providers, a single provider chosen after pitches from different companies, or a utility that runs the tape on a non-profit basis.
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