Race for Europe’s first ‘real-time’ stock trade tape heats up

By Huw Jones

LONDON (Reuters) – Banks and asset managers are vying with Europe’s exchanges to develop technology that can deepen the pool of investors in the continent’s capital markets and better compete with Wall Street.

The United States has long had a ‘consolidated tape’ aggregating stock and bond prices from competing trading platforms for investors to spot the best deals, and the European Union and Britain seek to match this over the coming three years.

“The purpose of the tape is to democratise access to market data and to make sure that everybody is seeing the full breadth and depth of the market,” said Natan Tiefenbrun, president of North American and European equities at Cboe Global Markets (NYSE:), a pan-European stock exchange.

The current “messy” and fragmented system for market data discourages investors, Tiefenbrun added.

EU securities watchdog ESMA said it will consult before the end of May on its criteria for selecting winning bidders to run a tape for bonds initially, and then one for stocks.

The two contenders that have emerged so far to run an EU stocks tape highlight the tensions between exchanges and banks and asset managers over the price of market data.

Exchanges had opposed a tape in order to guard their lucrative data, while asset managers and banks say there would be no data without their trades. To bring exchanges on board, the EU has mandated exchange contributions to a tape.

EuroCTP, backed by 14 exchanges including Deutsche Boerse (ETR:) and Euronext, is moving early by investing millions of euros to start building a stocks tape now, before any regulatory nod.

A little further behind, French consultancy Adamantia launched a feasibility study for a stocks tape in 2021, with support from Barclays, BNP Paribas (OTC:), Credit Agricole (OTC:), Deutsche Bank, Societe Generale (OTC:) and UniCredit.

Adamantia said it was securing an investment plan and selecting a technology company for a tape, backed by 10 buy- and sell-side institutions.

“Once we finalise this step, the objective is to form a joint-candidature … and prepare for the upcoming ESMA tender,” said Adamantia partner Antoine Pertriaux.

ESMA is expected to invite bidders for a bond tape by early next year, and for a stocks tape after that.

An Oliver Wyman report for European exchanges industry body FESE estimated it would cost up to 98 million euros ($105.09 million) to build a stocks tape, but proponents say a single real-time snapshot of prices would make cross-border trading in Europe easier and lure more investors. Only large market participants with deep pockets can typically afford to get prices from the many trading platforms dotted across the EU.

In the United States, the consolidated tape electronic system has been in place for decades, overseen by the Consolidated Tape Association, a grouping of exchange participants including the New York Stock Exchange and the Nasdaq.

OPERATIONAL PHASE

Britain is also making plans for its own tapes, overseen by the Financial Conduct Authority (FCA).

“By building a more complete picture of the market, a tape will reinforce the UK’s position as a leading centre for the listing and trading of bonds,” said Sarah Pritchard, FCA executive director for markets.

European funds industry body EFAMA says a tape should serve market participants and in “no way be used to render European exchanges’ own proprietary feeds more attractive”.

EuroCTP CEO Eglantine Desautel told Reuters there is a need to begin building the EU tape given it has to knit together 300 trading and trade reporting platforms across Europe.

“We are moving to the operational phase right now, and in the beginning of 2025 will have the first elements for testing,” Desautel said.

Tiefenbrun said Cboe was potentially interested in being part of a stocks tape in the EU and one in Britain, adding there is “nervousness” over EuroCTP.

“Will the shareholders of EuroCTP deliver what the industry wants or will their long-term interests be better served by a tape that protects their existing market data revenues?”

EuroCTP said it will act with “full autonomy” to serve all market participants.

Britain’s FCA is due to set out further details on what a UK tape would look like, starting with bonds.

The London Stock Exchange Group (LON:) said a UK stocks tape should be limited to prices of completed transactions, narrower than the EU tape, which will also include indicative “pre-trade” prices. A tape “cannot be both operationally robust and low-cost”, LSEG said in a paper published last month.

On the bonds side, a major EU and UK contender, a troika of Bloomberg, MarketAxess and Tradeweb, threw in the towel earlier this year, citing complexity.

This left Etrading Software alone for now, with CEO Sassan Danesh saying the company plans to bid for both the EU and UK bond tapes, citing its neutrality.

“We are a technology company, and we are happy to make money from the technology and operations, we are not looking to make money from the data,” Danesh said.

($1 = 0.9326 euros)