Brussels proposes tough targets for live trading database traders

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Brussels is proposing to ditch the companies that manage its real-time stock trading database if they fail to meet revenue targets for two years, a move that has raised concerns among some industry participants about the effectiveness of the ambitious scheme.

THE European Commission he suggested setting minimum revenue targets for companies that maintain a database of real-time stock information, known as a consolidated tape, according to documents seen by the Financial Times. If the data provider fails to meet the two-year target, officials could withdraw its offer, according to a proposal circulated in Brussels.

The plans form the basis for a meeting between officials and industry on Thursday that will try to fine-tune the finer details for handling the tapes.

Brussels has been pushing for the tapes, which would be similar to those in the United States, as a way to deepen and unify the EU’s fragmented financial markets.

The EU wants to bring together basic trading information, such as price and trade size, from Europe’s network of alternative exchanges and markets. Proponents say it will make European stock markets more transparent and attractive to international and retail investors.

Rainer Riess, director general of the Federation of European Securities Exchanges, which represents 35 trading venues, said potentially kicking out the data provider after two years “defeats the purpose of the tape a bit”.

“We want the tape to have a functional capital markets union. . . we cannot change supplier every two years,” she added.

The proposal estimates that revenue would be generated by 10,500 fund managers paying for the additional information the tape offers. Pricing would be tiered, with the majority taking up the simplest membership. Larger groups should choose the more expensive option. “Revenue projections are highly dependent on user interest,” the document says.

Anish Puaar, head of European equity market facility at market maker Optiver, said a tape by itself wouldn’t be helpful for the high volumes of trading it did each day.

“Many prop trading firms like us will still have to buy the fastest products sold by the exchanges as the consolidated tape will not be suitable for trade execution,” he added.

Brussels has already mandated that the tape will be managed by a private company, chosen after a tender. Euronext, Deutsche Börse and Nasdaq are among 14 exchanges applying to partner on an equity tape.

European markets have suffered from a shortage of quotations and liquidity in recent years, compared to the United States.

Stock turnover, a measure of market liquidity, rose 40% in the six years to 2022 in the US but remained flat over the same period in Europe, according to data compiled by AFME, a banking lobby group.

The proposed consolidated tape has deeply divided the market participants in Europe. Wealth managers have been broadly supportive because it means live stock and ETF prices from exchanges across Europe will be available in one place.

But European stock exchanges have strongly opposed its introduction, stating that data handover deprives trading venues of revenue e threatens liveability of some of the smaller exchanges in the region.

“This [proposal] it’s about the perception of lost revenue for exchanges,” said Susan Yavari, senior advisor for regulatory policies at the European Fund and Asset Management Association, which is lobbying for a consolidated tape.

He said that by setting a revenue target, the commission was “making the ability to generate the maximum amount of revenue one of the key selection criteria”, rather than focusing on the “intrinsic value of an established tape”.

The commission declined to comment.