News | Consolidated tape
COBA abandons work on European consolidated tape
The latest, industry-led attempt to create a consolidated tape in European equities has failed. The COBA Project has announced it has suspended operations just four months after its official launch, blaming regulatory uncertainty and a lack of participant support for the shelving.
COBA was set up last November by trading firm executives, Graham Dick, former head of business development at Chi-X Europe and Mark Schaedel, former global head of market data at NYSE Euronext, to address complaints by market participants that execution quality has become difficult to monitor in increasingly fragmented equity markets. Price transparency has also become a major concern for regulators since the financial crisis. Working with FIX Protocol on data standards, COBA developed an implementation plan setting out costs and proposing a revenue-sharing arrangement. Under the scheme, all trading data distributed by exchanges and alternative trading platforms was to be bundled into a single subscription for a flat fee. Revenues were then to be distributed back to participating firms according to the
Best Execution | Spring 2013 Graham Dick
contribution they made to price formation. European exchanges collectively earn more than €1bn a year from the provision of data, leading to regular complaints that charges are excessive. Lack of support and divisions between various constituencies in the financial markets is partly to blame for the project’s failure, says COBA. While exchanges were willing to adopt COBA’s proposed commercial model and participate in a post-trade solution, they were concerned about the potential expansion of scope to include pre-trade data. Data vendors questioned whether there was sufficient user demand for post-trade only scope while sellside participants worried about the impact of
adopting best practices for OTC trade reporting and were seeking the maximum reduction in market data costs. Buyside participants, meanwhile, were generally supportive of the proposals although winning their commitment had proven challenging given previous abortive attempts to establish a consolidated tape. However, in the end they were unwilling to incur the incremental costs associated with a phased implementation. However, the greatest hurdle
for the project, say Dick and Schaedel, has been regulatory uncertainty. The European Commission is now considering a number of options for a consolidated tape after some member states objected to an earlier proposal to create a competitive model involving different providers. Choosing a single provider, or finding a utility to run the tape on a non-profit basis, are the other options on the table.
“Regulators and policy
makers are unable to endorse any commercial initiative and due to increased political pressure to revert to a single tape provider solution, there is significant execution risk for any commercial solution,” said COBA in a statement. ■
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