Bloomberg Intelligence backs consolidated tape in Mifid III

Trading firms may see no reduction in data costs after the introduction of transparency rules by the European Union and should back instead the introduction of a European consolidated tape under Mifid III, a report from Bloomberg Intelligence published on Monday claims.

Bloomberg Intelligence urged asset managers, broker and market-makers to support the introduction of a consolidated tape (CT), something that is already in place for US equities, as an opportunity to maximise transparency and help the development of relatively opaque markets such as fixed income and select strategic derivatives transactions.

Bloomberg Intelligence said Mifid III proposals are due at the end of September this year.

The report echoes comments made by Tilman Lueder, head of the European Commission Securities Markets Unit on June 23, where he said that market feedback had led to efforts to extend CT plans to derivatives, bonds and exchange traded funds. The Mifid II rules allowed private consolidated tape providers to emerge, but were not compulsory. The UK's consultation on its own CT began earlier this month.

“With formal proposals due by the end of Q3 and plans to launch a beta version for testing in 2023, a bloc-wide real-time data tape is unlikely to be market ready by 2025," said Sarah Jane Mahmud, senior government analyst at Bloomberg Intelligence in a release. "Extensive legislative changes would be necessary to make CT-provision commercially viable, including new rules on data quality and pricing.”

Mifid II extended transparency requirements and required reporting of price and execution data for the first time in many, but implementation has been dogged by poor quality submissions, timing issues and a perceived lack of recourse. The latest version is intended to resolve some of these issues.

Earlier this month, the DTCC’s Derivatives Repository (DDRL) was fined €408,000 (£349,000) over European Market infrastructure Regulation data breaches. Last week, the Europeans Securities and Markets Authority (ESMA) said that sanctions in 2020 under Mifid rules totaled 8.4 million euros over the calendar year, compared to 1.8 million euros in the prior period covering 2019.

ESMA published its final report on obligations on market participants to publish market data on June 1. The report seeks to clarify and improve reporting from the beginning of next year. The US has a longstanding version of consolidated pricing for bonds, reported on a post trade and relatively backward looking basis, called the Trade Reporting and Compliance Engine (TRACE).