As announced in the December 2022 Edinburgh Reforms, HM Treasury and the FCA propose to put in place the necessary regime for a consolidated tape by 2024, with the aim of strengthening the UK’s position in global wholesale markets. FCA's review of the UK's wholesale markets conducted with HM Treasury indicated that a consolidated tape for bonds should take priority, given the more dispersed nature of information on bond trading and issues with data quality. A consolidated tape for equities can follow later. A consolidated tape will deliver a single source of data giving an accurate view of the bond market, which will address many of the harms identified in the consultation paper.

Introducing a consolidated tape will need legislative and regulatory changes which will be made under new powers granted to HM Treasury and the FCA under the Financial Services and Markets Act 2023. HM Treasury will repeal and replace the Data Reporting Services Regulations (DRSRs) and make necessary changes in respect of relevant retained EU law, and the FCA will make rules setting the requirements for Consolidated Tape Providers (CTPs) under new rulemaking powers in respect of Data Reporting Services Providers (DRSPs), including CTPs. The FCA notes in the consultation that HM Treasury is expected to publish the expected legislative amendments shortly.

We set out the key takeaways from the FCA's consultation below:

• Creation of an Equities and Non-Equities Consolidated Tape: One of the central proposals is the establishment of a framework for an equities consolidated tape, encompassing pre and post-trade data, as well as a non-equities consolidated tape focusing on post-trade data. Under this framework, all trading venues and Approved Publication Arrangements (APAs) would be mandated to connect to the consolidated tape (CT) and provide their data to the CT provider (CTP) free of charge. The CTP would not be obligated to contribute to the data providers' cost recovery, and no revenue sharing model is currently being proposed.
• Licensing and Customer Classes: The FCA suggests the introduction of re-use licenses, allowing CT data to be employed in the creation of derived services, alongside licenses for direct use without such rights. Additionally, the FCA proposes retaining an obligation for the CTP to charge on a per-user basis, based on the current Article 87(1) of the MiFID Org Regulation. The proposed customer classes for the CTP's services would be differentiated.
• Instruments and Real-Time Data Publication: The proposed scope of instruments for the CT would align with the transparency regime, covering sovereign bonds, other public bonds, convertible bonds, covered bonds, corporate bonds, other bonds, ETNs, and ETCs. Trading venues would be required to transmit data to the CTP as close to real time as technically possible. To facilitate data receipt, the CTP is expected to develop a standardized, open-source API.
• Transparency and Data Coverage: The CT would incorporate trade reports for all categories of bonds under MiFID, excluding ETCs/ETNs. It would consolidate trade reports for all non-ETC/ETN bonds admitted to trading or traded on a trading venue in the UK. The CT data published should include all post-trade transparency requirements, covering all fields and flags. It would focus solely on transparency information and exclude broader regulatory data.
• CTP Connectivity and Tender Periods: The proposal requires all trading venues and APAs publishing trade reports on bonds to provide data to the CTP. New trading venues and APAs would be mandated to connect and transmit data to the CTP within six months of their operations. Initially, the rules would incentivize a single CT per asset class, but multiple CTPs may be considered after the first tender period concludes.
• Amendments to Transparency Framework and Timeline: The consultation paper highlights amendments to the pre/post-trade transparency framework under MiFID to enhance data quality. In Q4 2023, the FCA plans to consult on a revised transparency regime specifically for bonds. The implementation of changes to the transparency regime is projected to occur in the summer of 2025.
• Consolidation of APAs/ARMs Framework: As part of the proposed changes, the APA/ARMs framework would be consolidated from various Regulatory Technical Standards (RTS) and statutory instruments into the FCA Handbook without significant policy alterations.

Concluding thoughts

The FCA's publication of the consultation paper CP23/15 marks an important step towards establishing a consolidated tape in the UK. The proposed framework aims to improve market transparency and data quality, while ensuring comprehensive coverage of relevant instruments. Market participants will be closely following the developments in this consultation, as the outcome will have a significant impact on market structure and data accessibility in the UK's financial landscape.

Authors: Diego Ballon Ossio and Sara Evans