Consolidated Tape key to progressing Capital Markets Union | AFME

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Consolidated Tape key to progressing Capital Markets Union
26 Nov 2021
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Author Rebecca Hansford <p>Head of Media Relations</p>
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Following the publication of the European Commission’s Capital Markets Union (CMU) package, including a legislative proposal for the MiFIR Review, Adam Farkas Chief Executive of the Association for Financial Markets in Europe (AFME), commented:

“Today’s package is an important step to re-energize the CMU project. This is a real chance to drive forward ambitious policies that strengthen the capacity of EU capital markets to serve the European economy. A structural equity gap remains in Europe and there is still much work to do on enhancing the provision of risk capital to meet the major long-term investment needs of the coming years. These challenges will only be addressed by a review of MiFIR that supports efficient and competitive capital markets and that promotes wider investor participation.”  

With respect to the MiFIR proposals, Adam Farkas commented: 

“The proposal for a consolidated tape is at the heart of today’s package and is essential for delivering CMU.  AFME members agree a real-time tape for equities is the right solution, but the devil will be in the detail when it comes to its final design and we look forward to engaging with the co-legislators on this.

“Making real-time equity market data available to all investors will provide a single view of trading in Europe, which is key for creating a truly pan-European market. This will not only promote more attractive and competitive capital markets in Europe, but it could also help to reduce home country bias in the EU, where investors tend to prefer companies from their own country. While a consolidated tape won’t deliver CMU on its own, it is an important next step to creating a truly unified, investable and tradeable market in the EU. 

“Regrettably, the proposal made public today does not prioritise a consolidated tape for equities with pre-trade trading data. We urge the co-legislators to extend the scope of the consolidated tape for equities to include pre and post trade trading data from the outset.

“Of course, the consolidated tape will only be as good as the data that feeds into it. It is encouraging that the Commission is prioritising data quality issues and has set up an expert group to advise on the topic. We encourage the co-legislators to put frameworks in place that allow supervisors to capture a more accurate picture of the trading landscape.

“In view of the poor quality of the existing trading data sets, we caution against further adjusting key fixed income or equity market structure features at this point without proper evidence and before the consolidated tape is enacted. AFME supports ESMA’s acknowledgement  that the existing data does not fully reflect the equities or bonds trading landscape, and that further work is needed to improve existing evidence.

“While AFME members are strongly supportive of well-calibrated, transparent fixed income markets, analysis of comprehensive data is essential for this accurate calibration to ensure an informed, balanced and effective transparency regime.  As such, AFME would like to first see the development of a bond consolidated tape and to then make any necessary changes to the post-trade transparency regime once sufficient data has been gathered. This will avoid exposing committed liquidity providers to potential undue risks, especially when trading in illiquid instruments or transactions above a certain size, because if not properly considered, it may lead to diminishing liquidity available to corporates and investors.” 

With respect to the other parts of the CMU package, AFME is fully supportive of the establishment of a European Single Access Point (ESAP) for financial and non-financial information publicly disclosed by companies. If appropriately designed, the ESAP has the potential to enhance cross-border investors’ access to company data. It should be configured with the primary goal of increasing the availability and transparency of companies financial and non-financial ESG disclosures for the benefit of end investors without increasing costs or administrative burdens for corporates or end investors.

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Rebecca Hansford

Head of Communications and Marketing