The Financial Conduct Authority has unveiled analysis showing that introducing a consolidated tape for UK equities could deliver substantial benefits to market participants, with potential annual savings reaching £154 million for traders and investors.
Substantial Cost Savings for Market Participants
According to the regulator's detailed assessment, the consolidated tape could reduce costs for traders by between £79 million and £154 million each year. This significant saving stems from eliminating the need for market participants to purchase data from multiple individual trading venues, instead providing a single, comprehensive source of post-trade transparency data.
The FCA's analysis forms part of its ongoing efforts to enhance the UK's market infrastructure following Brexit. The proposed tape would aggregate trade information across different platforms, creating a unified view of market activity that has long been available in other major financial centres like the United States and European Union.
Addressing Market Data Gaps
Sarah Pritchard, the FCA's Executive Director of Markets, emphasised the importance of this initiative, stating that "the absence of a consolidated tape has been a longstanding gap in UK equity markets". She noted that market participants currently face challenges in obtaining a complete picture of trading activity, potentially putting them at a disadvantage compared to their international counterparts.
The regulator's consultation paper, published recently, outlines how the tape would work in practice. It would be provided by a single commercial operator selected through a competitive tender process, with the FCA overseeing the arrangement to ensure it delivers value to the market.
Implementation Timeline and Next Steps
The FCA is currently consulting on the detailed design of the consolidated tape, with responses due by early December. The regulator aims to have the tape operational during 2024, representing a significant milestone in the UK's post-Brexit financial services reforms.
Market participants have broadly welcomed the proposals, though some have raised questions about the commercial model and data licensing arrangements. The FCA has indicated it will consider these concerns carefully before finalising the framework.
Beyond the immediate cost savings, the consolidated tape is expected to enhance market transparency, improve price discovery, and strengthen the UK's competitive position as a global financial centre. The FCA estimates that additional benefits, including improved market quality and efficiency, could further increase the overall value proposition for participants.
This initiative forms part of the wider Edinburgh Reforms package announced by the government, aimed at ensuring the UK's financial services sector remains innovative and competitive on the international stage while maintaining high regulatory standards.
