MFA submits comment letter responding to FCA consolidated tape consultation

Managed Funds Association (MFA) submitted a comment letter to the UK’s Financial Conduct Authority (FCA) in support of the implementation of a consolidated tape for fixed-income markets. A consolidated tape for bonds will substantially benefit UK investors and markets by improving market transparency, price discovery, liquidity, and execution quality.

In the detailed comment letter, MFA provides an overview of the academic research regarding consolidated tapes generally, and then addresses the following concepts in response to the FCA’s questions:

Proposals (Consultation Paper, ch. 3)

  • MFA supports the transparent, public, and reasoned selection of a single CTP, required to charge commercially reasonable rates to subscribers for the asset classes chosen by the subscriber.

The scope and operation of a consolidated tape for bonds (Consultation Paper, ch. 4)

  • The Consultation proposal to begin with a fixed income securities CT is pragmatic and reasonable, based on a standardised, open-source protocol; MFA would urge the FCA to act swiftly to seek a tender process to select one or more CTPs for equities CTs.
  • Firms should not be mandated to use any or all of the CT data, including historical data or value-added data created by the CTP, but should be allowed to select the data sets needed by that firm.

Economic Model (Consultation Paper, ch. 5)

  • MFA does not believe that the CT should be required to share revenues with the data providers; as with TRACE, data should be free after 15 minutes.

Rules Framework (Consultation Paper, ch. 6)

  • MFA does not support the proposed deletion of the requirement for the CTP to price on a reasonable commercial basis.

Discussion: provisions for a consolidated tape for equities (Consultation Paper, ch. 8)

  • MFA supports broad CTs for equities that cover all applicable asset classes, including shares, depositary receipts, ETFs, ETCs, ETNs, and other similar instruments and recommends publishing post-trade data after the CT is up and running.
  • As with the fixed income CT, MFA does not support a requirement that equities CTPs participate in revenue sharing with the data providers.
  • Subscribers should be able to subscribe to those CT asset classes that it wants, without requiring it to subscribe to an aggregated CT that contains trade data it does not need.