Creating a centralized stream of share trading data across various UK markets is projected to incur costs of approximately £93 million, while simultaneously delivering benefits of up to £100 million over the next decade. This forecast was presented by the UK’s Financial Conduct Authority (FCA) as part of its new initiative to establish a UK equities consolidated tape by 2027. The proposed tape aims to provide investors with access to optimal bid and offer prices for shares, alongside comprehensive post-trade data.
Currently, the UK is trailing behind other regions in consolidating share trading data. The European Union is set to begin its own consolidation efforts next year, and the United States has been leveraging similar systems since the 1970s. The FCA’s plan to create this single data source is expected to stimulate investor participation and encourage more companies to list on the London markets—a response to the recent decline in initial public offerings that has raised concerns within the financial community.
Notably, there has been a resurgence in new listings in the UK, exemplified by companies such as Shawbrook, a small business lender, and Princes, which specializes in canned tuna. Simon Walls, the FCA’s interim executive director of markets, highlighted that while the UK’s diverse trading options enhance competition and reduce fees, they also complicate overall liquidity assessment. A consolidated tape, he argued, would simplify access to equity market data, thereby supporting improved decision-making for investors and potentially increasing market participation.
The FCA estimates the project will yield benefits valued between £50 million and £154 million over the next decade, while the total expenditure for creation, operation, and regulation is expected to range from £57 million to £130 million. Feedback from market participants indicates a preference for a consolidated tape that not only encompasses UK markets but also includes European and Swiss equities. The FCA noted that aligning its proposals with those of the EU could facilitate the creation of a unified data stream by a third party.
Some critiques have emerged regarding the potential impact of a consolidated tape on trading venues, particularly concerning a shift from transparent markets like the London Stock Exchange to more obscure options such as dark pools. However, the FCA’s analysis suggests that such a transition is improbable.
Reactions to the FCA’s plans have been largely positive, with industry leaders expressing hope that the consolidated tape will dispel misconceptions regarding liquidity in the UK market. Eleanor Beasley, chief operating officer for EMEA equities at Goldman Sachs, labeled the initiative as a crucial step toward enhancing market perception and functionality.
To that end, the FCA is currently seeking expressions of interest for a contract to design and manage the equities consolidated tape for a five-year term. A review of the project’s effectiveness is slated for two years following its launch, with a possibility of adjusting the volume of pre-trade pricing data shared.
In a related development, a contract previously awarded for a consolidated tape focused on bond markets has come under legal scrutiny due to challenges raised by an unsuccessful bidding party. The FCA has responded by applying for a High Court ruling to lift an automatic suspension on the contract, asserting that the legal challenge lacks substantive merit.
