This week, EU Policymakers start finalising the review of the Markets in Financial Instruments Regulation. The European Parliament Economic and Monetary Affairs (ECON) Committee will engage in so-called trilogue negotiations with the Council and the Commission to reach a common position. One of the most contentious issues are changes concerning the consolidated tape (CT).
The CT provides data on market trades. A pre-trade CT comprises the visible prices and volumes of orders that are placed in order-driven markets and that are advertised in quote-driven markets. Market fragmentation is a major obstacle for the realisation of the Capital Markets Union CMU). Real-time publication of pre-trade information on the CT addresses this fragmentation hurdle, thus driving more efficient pricing and capital allocation, early identification of risks and greater market integrity. In the ideal CMU-reality, retail investors should not have to worry about the pricing of transactions; the pre-trade CT assists them in finding the optimal allocation of their savings.
European Investors-VEB (EI) supports the analysis, ‘Mission Possible’ published by Cboe earlier today. Mission Possible demonstrates that a real time pre-trade CT, including a European Best Bid & Offer (EBBO) is the only credible option under consideration:
- It is technically viable; and;
- It provides useful price guidance to investors, despite the latency from geography and consolidation.
A pre-trade real-time CT serves to deliver what the industry needs to support growth in EU capital markets. It provides retail investors with reliable and useful data, thereby encouraging greater participation in EU equity markets.
You may access Cboe’s Mission Possible, under this link