Changing the Game: the Future of European Markets

What Is Currently Happening?

The European markets have been rocked by conflict over the current regulation of exchanges and the information they provide. Various stock exchanges and asset managers are at the forefront of the debate, which could change the future of European Markets.

The EU parliament is discerning a potential change in policy and regulation for brokers and trading platforms to reform the bloc’s security rules and enhance its market efficiency. Recently, questions have been asked about how much information investors should have access to in finding the best deals in Europe’s stock markets. The Exchanges and Asset Managers have been on opposing sides.

At present, investors get delayed pricing on stocks while pre-trade prices on offer are available with depth, while various exchanges provide information on stocks independently. With a complete and accurate view of the European capital markets, investors, both institutional and retail, are able to make investment or trading decisions with a comprehensive view of the available liquidity and trading opportunities.

The EU parliament is now proposing a consolidated tape that updates the completion of share trades in real time. At the same time, various EU states have supported the idea but with less comprehensive pre-trade data.

What Is A Consolidated Tape?

According to NASDAQ, a tape is a service that provides information on the pricing, sizing and volumes of transactions on major exchanges. This information is critical in making investment decisions as market activity typically informs an investor on the best price to buy or sell.

The consolidated tape is simply a combination of all the tapes offered by various exchanges. The European Stock markets remain fragmented as different exchanges exist in multiple countries, with some stocks trading on more than one exchange.

Why Are Exchanges And Asset Managers Opposing Each Other?

On the one hand, Asset Managers believe that a real-time pre-data tape could bring the European Markets in line with the current U.S. Market standards while reversing a worrying trend of the market being less dynamic than its global counterparts.

Exchanges, on the other hand, worry that including the real-time pre-trade data could further distort the structure of European Union Markets as more regulation disrupts the current flow of things.

What Does This Mean For The Future Of European Markets?

A consolidated tape will likely improve transparency and market efficiency as exchanges provide consolidated data on the EU’s prices and volumes of traded securities.

Market surveillance for supervisors will be straightforward, with only one source of information required to get a holistic view of the market.

Improved views on trading opportunities and best execution could be enhanced for retail investors and asset managers, while pre and post-trade analysis for fund managers is less ambiguous.

Furthermore, investment flows could be refined while local European businesses can better access global capital as liquidity and pricing information is more robust and accurately presented for global investors.

Finally, such a step could bring the European Markets into the same high-standard position the U.S. markets possess, thereby improving its competitive advantage on a global scale.