MFA submitted a comment letter to the Financial Conduct Authority (FCA), calling for a swift implementation of a consolidated tape for UK fixed income markets. The letter is a response to the FCA’s December consultation paper on the framework for a consolidated tape for fixed income securities. It builds upon the comment letter MFA previously submitted in September 2023 in response to the FCA’s July Consultation.
MFA supports the implementation of a consolidated tape for fixed income securities because it will improve market participants’ access to timely, accurate data. Market data is critical to investment managers’ strategies and improved data will benefit UK market competitiveness. MFA also encourages the UK to improve the functioning of an even larger portion of its capital markets by developing a consolidated tape for equities.
In the detailed comment letter, MFA addresses the following concepts in response to the FCA’s questions raised in the July and December Consultations.
Number of CTPs per asset class (December Consultation, ch. 3)
- MFA continues to strongly support the appointment of a single CTP per asset class through a tender process.
The scope and operation of a consolidated tape for bonds (December Consultation, ch. 4)
- MFA concurs that it is not necessary to amend the scope of the bond CT framework first proposed in the July Consultation to begin with a fixed income securities CT is pragmatic and reasonable, based on a standardised, open-source protocol.
- As noted in the MFA September Comment Letter, MFA strongly supports the decision of the FCA to make consumption of the CT data discretionary (i.e., optional) for market participants such as buyside funds.
- MFA continues to support not delaying the introduction of the CT until after the bond transparency regime is adopted and agree that the CT could help identify and address data quality issues.
- On the matter of deferrals, MFA agrees that the responsibility for deferrals should remain with the data service provider and that consideration should be given to allowing the CTP to offer a deferral checking service should subscribers want the additional service.
- MFA strongly supports the CTP being required to make historical data available to subscribers and appreciates that the December Consultation recognises that historical data can increase usage of the CT and provide an additional revenue source to the CTP.
Economic Model (December Consultation, ch. 5)
- MFA does not support the fixed income CT sharing revenues with the data providers, and \CTPs should not be obligated compensate trading venues and approved publication arrangements (“APAs”) for providing data and connectivity.
- As with FINRA’s TRACE system, data should be free after 15 minutes for retail and academic uses, noting that FINRA has not suffered economically from offering trading data, on a fifteen-minute delay, without charge.
- MFA supports the clarification in the December Consultation that would impose appropriate safeguards with the CTP’s provision of value-added services to restrict it from using its position to take advantage of CT subscribers; MFA believes further that different license types, with appropriate transparency, would enhance the overall viability of the CT.
Rules Framework (December Consultation, ch. 6)
- MFA supports the continued applicability of current obligations contained in Regulations 13, 44 and 45 of the DRSRs and Articles 5 to 9 of MiFID RTS 13.
- MFA does not support the proposed deletion of the requirement for the CTP to price on a reasonable commercial basis and on a non-discriminatory basis, with appropriate guardrails and controls to assure transparency.
- MFA agrees with the proposal to require trading venues and APAs to provide data for free to the CTP and with respect to data quality.
Consolidated tape for equities (December Consultation, ch. 8)
- MFA supports the subsequent development of 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 once the CT is operational.
- While MFA opposes revenue sharing with the CTP for a fixed income CT, MFA would not oppose revenue sharing with data providers, provided adequate protections are built in to protect against pricing abuse.
- MFA supports allowing equities CT subscribers to subscribe to those CT asset classes that they want, without requiring it to subscribe to an aggregated CT that contains trade data they do not need.
- To facilitate subscriber regulatory needs, the CT must include data on market outages.
Consultation on payments to data providers (December Consultation, ch. 10).
- Consistent with the approach originally proposed by the FCA, MFA does not support payments to data providers for a fixed income CT.
