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FCA sets Q4 for derivatives reporting consultation, presses on with CT

This article was first published in Global Investor Group.

The UK Financial Conduct Authority (FCA) will canvass opinions about derivatives transparency rules “later this year”, after pressing ahead with plans to introduce a bond and equity consolidated tape (CT).

The FCA said it has proposed a CT for bonds and equities in that order, and that it intends to run a tender process to appoint a provider for the bond feed first. It will consider further changes and assess other asset classes in a separate consultation.

“The FCA will consult on further reforms to bond and derivative transparency requirements later this year, with the aim of creating a simpler and more effective regime which will enhance the content and delivery of trade data in UK markets alongside the CT,” it said in a release.

The moves are part of its aims under the UK Edinburgh reforms to establish a regulatory framework for its reformed market oversight regime after Brexit. The CT plans mirror efforts by the European Union to establish its own regime, and go alongside other guidance it has issued such as defining the so-called “trading venue perimeter” that defines which firms need to register for oversight. The trading venue guidance comes into force in October.

“The new consolidated tape will help reduce trading costs, increase transparency and improve data quality,” Sarah Pritchard, executive director of markets and executive director of international at the FCA said in a notice. “Our other measures announced today aim to further support the UK’s thriving financial services sector.”

The Association for Financial Markets in Europe (AFME) has welcomed the FCA’s decision to press ahead with the CT plan, but redoubling its previously voiced concerns on market data cost and backing the use of pre-trade and real time data.

“This is a welcome step as it will help to ensure that associated data costs remain as low as possible, while addressing the current fragmentation of post-trade transparency data,” Adam Farkas, chief executive of AFME said in a release. “A single consolidated tape provider will also be easier for the official sector and industry to monitor.

“AFME supports the development of a consolidated tape and the role it plays in improving data quality. However, we recognise that even an appropriately constructed consolidated tape will not fully address the current unacceptably high cost of market data. We trust that the FCA’s extensive work on wholesale data will help address anomalies in this area, which are detrimental to financial markets and their users.”

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