13.III.4.1.3 Framework for CTPs

CESR initially proposed that the CESR proposals for APAs and common data standards could be supplemented by the development of a single mandatory consolidated tape (MCT). The MCT would function as a single point of access to equity post-trade data.1 This would be somewhat similar to the framework in the U.S, where a separate entity named the Consolidated Tape Authority (CTA) has been set up to operate the consolidated tape.2 The MCT-model could be run in several ways. One option would require RMs, MTFs, and APAs to make their equity post-trade data available to the MCT in a prescribed format. The MCT would then consolidate the data and make it available to the market (in a non-discriminatory fashion) at a ‘reasonable cost’. Alternatively, all RMs, MTFs, and APAs would have to make their data available for free and then be awarded revenues made by the MCT according to a prescribed formula.3 Another option would be to establish an MCT, but in this case the MCT would be a single entity that would be a commercial undertaking following a public tender upon the merit of its bid submitted to the European Commission.4

A majority of market participants did not believe it was necessary to introduce an MCT led by a public authority until the other CESR proposals (regarding APAs and common data standards) had been implemented. These market participants believed that it was to be seen whether common data standards and APAs would be sufficient to facilitate the development of an industry-led consolidated tape.5 A minority of market participants believed that the aim of an industry-led European consolidated tape could not be achieved. In their view, a consolidated tape led by a public authority was necessary.6

CESR reacted by saying it strongly believed in the necessity of an EU consolidated tape. CESR stated that a consolidated view of equity post-trade data was non-existent under MiFID I (at least at a reasonable price) or useful for the vast majority of market participants.7 CESR recommended implementing the tape on the basis of a project developed by the industry. CESR added that, in case of default at any point in the process (including a failure to achieve a firm commitment of the industry), MiFID II needed to encompass a clear course of action and ‘require the establishment of a mandatory single European consolidated tape run as a not-for profit entity (…)’.8

The Commission’s then examined a number of consolidation options, including a public non-profit-making monopoly provider (similar to the US-model and CESR proposal), a commercial monopoly provider, and competitive model.9 Ultimately, the Commission’s MiFID II Proposal set out the conditions for the emergence of multiple CTPs (i.e. a competitive model).10 The Commission preferred the option of a competitive model of Consolidated Tape Providers (CTPs), because the Commission believed it was the most flexible model.11 By contrast, the European Central Bank (ECB) preferred a single CTP, rather than a competitive model of CTPs.12 The subsequent negotiations in the Council resulted extensive negotiations on the merits of the monopoly and competing/commercial models.13 The view of the Commission is apparent in the final MiFID II text. MiFID II covers a regulatory framework for CTPs that can compete with each other and with non-CTPs (data vendors). The MiFID II-review clause adopted in the final text, requiring the establishment of a single commercial CTP in case the industry provides no consolidated tape, reflects CESR’s recommendation to have a safety-net in place in case market forces would prove to be insufficient.