A consolidated tape is an electronic system which combines sales volume and price data from different exchanges and certain broker-dealers.
It consolidates these into a continuous live feed, providing summarised data by security across all markets.
In the US, all registered exchanges and market centres that trade listed securities send their trades and quotes to a central consolidator.
This system provides real-time trade and quote information (Commission Staff Working Document of 18 May 2016, Impact Assessment Accompanying the document Commission Delegated Regulation supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions, C(2016) 2860 final, p. 60).
Directive 2014/65/EU (MiFID II) provides for the possibility of establishment of a consolidated tape both for equity as well as for non-equity instruments.
European Commission’s public consultation published on 17 February 2020 on the review of the MiFID II/MiFIR regulatory framework describes the reasons for the establishment of the consolidated tape and the current state of play in the following way (p. 12):
“The EU has a competitive trading environment but investors and their intermediaries often lack a consolidated view of where financial instruments are traded, how much is traded and at what price. Except for the largest or most sophisticated market players (who can purchase consolidated data pertaining to the different execution venues from data vendors or build their own aggregated view of the market), investors have no overall picture of a fragmented trading landscape: while the trading often used to be concentrated on one national exchange, notably in equities, investors can now choose between multiple competing trading venues, which results in a more fragmented and hence more complex trading landscape. At the same time, fragmentation per se should not be discarded as it is inherent to the introduction of alternative trading systems (MTFs, OTFs) which has led to a significant increase in competition between trading venues with positive effects on trading costs and increased execution quality.
In order to optimise the trading experience, a single price comparison tool consolidating trading data across the EU - referred to as the consolidated tape (‘CT’) - would help brokers to locate liquidity at the best price available in the European markets, and increase investors’ capacity to evaluate the quality of their broker’s performance in executing an order. A European CT could also be one major step towards “democratising” access to “market data” so that all investors can see what the best price is to buy or sell a particular share. A CT may not only prove useful for equities but also for exchange-traded funds (ETFs), bond or other non-equity instruments. Practical experience with a consolidated tape is already available in the United States, where a consolidated tape has been mandated for shares (consolidating pre- and post-trade data) and bonds (post-trade data).
A European CT could, for a reasonable fee, provide a real-time feed of information, not only for transactions that have taken place (post-trade information), but also for orders resting in the public markets (pre-trade information). MiFID II /MiFIR already provides for a consolidated tape framework for equity and non-equity instruments but no consolidated tape has yet emerged, for various reasons [...]”.
Also the ESMA representative on 20 April 2022 argued that when MiFID II/MiFIR came into force in 2018 “one of the key focus points was to increase transparency in the European markets. A lot has happened since then and overall the markets are definitely more transparent than they were. Nonetheless, the detailed information on trades in the different asset classes remains fragmented, being published by various trading venues and/or trade repositories. What has not emerged is a ‘consolidated tape’ – i.e. a place where all the trading that has taken places is published, easily accessible in a single location”.
ESMA believes that in order to drive forward towards a genuinely integrated European capital market, the emergence of consolidated tapes in the EU is an “indispensable step”, however, it does not appear feasible to run the procedures for the four asset classes all in parallel, hence, a staggered approach should be introduced. This would provide more time to non-prioritised asset classes (typically derivatives) to address remaining issues, for instance in relation to the format and quality of the transparency reports (ESMA – driving forward high-quality supervision and transparency in a single EU capital market, ECMI/CEPS Webinar 20 April 2022, Verena Ross, Chair, European Securities and Markets Authority, 20 April 2022, ESMA80-187-945).
ESMA submitted in September 2015 draft regulatory technical standard (RTS) specifying the scope of the equity tape.
This RTS was endorsed by the Commission on 2 June 2016 and published in the EU Official Journal in 2017 (Commission Delegated Regulation (EU) 2017/571 of 2 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the authorisation, organisational requirements and the publication of transactions for data reporting services providers).
The respective non-equity scope has been set out in the ESMA's Consultation Paper of 3 October 2016 (RTS specifying the scope of the consolidated tape for non-equity financial instruments, ESMA/2016/1422).
ESMA's Final Report on the draft RTS specifying the scope of the consolidated tape for non-equity financial instruments has been published on 31 March 2017 (ESMA/2017/70-8792942901-40).
Recital 118 of MiFID II (see box) and ESMA itself acknowledge that the establishment of a non-equity consolidated tape is more difficult to implement and more complex than the equity one.
On 12 July 2019 the ESMA has published the Consultation Paper, MiFID II/MiFIR review report on the development in prices for pre- and post- trade data and on the consolidated tape for equity instruments (ESMA70-156-1065). Final Report in this regard has been published on 5 December 2019.
The provisions on the non-equity tape of Article 65(2) of MiFID II are applicable as from September 2019.
According to the European Commission Proposal of 25 November 2021 for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 600/2014 as regards enhancing market data transparency, removing obstacles to the emergence of a consolidated tape, optimising the trading obligations and prohibiting receiving payments for forwarding client orders (COM(2021) 727 final) single real-time post-trade consolidated tape per asset class will be established and the contribution of data by market data providers to the consolidated tape will be mandatory.
The intention of the MiFIR amendment is to remove the obstacles that have prevented the emergence of a consolidated tape. Among the data that the consolidated tape is expected to provide are post-trade information regarding all transactions in financial instruments. That information can be used for proving best execution by execution platforms - i.e. the requirement stipulated so far in Article 27(3) of MiFID II (Article 27(3) of MiFID II is deleted by the amendment).