Consolidated, real-time price information has long been a holy grail for the markets, but the UK and Europe have struggled to follow in the US footsteps to achieve centralised data – until now. With a clear plan in place for delivery, providers are now vying for the contract to provide this golden source. Sassan Danesh, CEO of Etrading Software, explains why the solution is so urgently needed – and how it could transform the bond market.
Washington is awash with talk about how the new Trump administration could upend the country’s bloated and unevenly harsh banking regulation. Banks may now find it easier to merge and to chase new businesses. But large and lasting changes to the landscape and methods of banking supervision in the US won’t be quick, or easy.
Competitive fixed-income markets benefit the financial services industry as well as the economy as a whole. Competition comes in many guises, including new technologies that have historically driven greater efficiency through the fixed-income ecosystem. Not all technologies are created equal, however, and in recent times regulators and many market observers have identified market data – more specifically, access to reliable and timely data – as a key area of inequality. This is where the consolidated tape comes in.
Fragmentation of data
The creation of a consolidated tape is the EU and UK policymakers’ solution to address the fragmentation of data in local bond markets. The appointment of a consolidated tape provider (CTP) in the EU and UK is the first step in tackling this challenge. That said, for the tape to achieve its ambition of supporting and promoting competitive markets, end users’ real and disparate needs must be prioritised. This is made more difficult as a result of recent divergence in the EU and UK regulatory regimes.
Given the scale of the challenge, market participants are urging both the regulators and the successful bidder(s) to work together to deliver a solution for the industry that creates a single, real-time, reliable source of post-trade data for all bond products to enhance transparency and efficiency.
For the tape to achieve its ambition of supporting and promoting competitive markets, end users’ real and disparate needs must be prioritised
Most observers agree that the consolidated tapes will drive very significant change in the fixed-income markets through the transparency that democratic access to reliable data will afford all market participants. And therein lies the challenge. Beyond democratic access to data, market participants’ needs diverge quite significantly depending on a series of factors around how the data will be used, e.g. to develop strategies, identify correlations, enable back-testing etc.
Consolidated tapes are undeniably a major step in the right direction. To really deliver on their promise, however, they must integrate with existing solutions and technology platforms. Without that integration they risk becoming redundant before they are sufficiently established to deliver meaningful results.
Question of integration
The question of integration is, in effect, the gatekeeper between ambition and reality. The corollary to the question of individual EU and UK tapes is the simple yet fundamental question: how do you consolidate the consolidators? Market participants demand a unified cross-jurisdiction platform that seamlessly integrates with their existing operating model (which is not, incidentally, an objective of the regulatory bodies).
The alternative to a single, integrated solution would be for users to connect, contract, and license individually to each CTP and other data sources. This is less efficient than a one-stop shop that provides simplified data procurement, reduced costs and guaranteed data consistency for all users within a firm.
There is an opportunity for vendors to work collaboratively with industry leaders to develop a reliable, robust and cost-effective platform that meets the needs of all parts of the fixed-income ecosystem. By unifying disparate data streams into a single, harmonised, cleansed and validated feed, vendors can help transform how financial institutions navigate an increasingly complex landscape.
The question of integration is, in effect, the gatekeeper between ambition and reality
Such a ‘consolidator of consolidators’ service would deliver a series of benefits that go beyond those relating directly to the data itself. Most notable of these are utility (the data through the service is cleansed and enriched for the end user to ensure usability across multiple use cases), vendor consolidation, cost reduction and accelerated access to the new tapes as they are launched.
As regulatory requirements grow more complex and trading strategies become more sophisticated, the demand for comprehensive, high-quality market data will only increase. Forward-thinking institutions recognise that staying ahead in this data evolution isn’t just about compliance or cost savings, it is also about gaining a competitive edge through better information management.
The evolution of market data solutions reflects the financial industry’s continuous pursuit of efficiency, transparency, and insight. From fragmented data sources to consolidated tapes and now to consolidated data platforms, each step addresses previous limitations while creating new possibilities.
