The Financial Conduct Authority set out plans on Friday to create a single stream of UK share-trading data and was due to start publishing figures showing the depth of the market from that day, as the regulator intensifies efforts to reverse the decline of London's public stock markets.
The FCA plans to award a tender next year for a five-year contract to build a UK equity consolidated tape, combining pre-trade bid and offer prices with post-trade data from the London Stock Exchange and other venues, including dark pools. The regulator aims to launch the tape within the next 18 months. In the meantime, the FCA was set to begin publishing its own interim data on Friday, known as the Market Activity Reporter for Shares, giving the total value of trading in all UK-listed shares.
Changes to equity-market infrastructure are also taking place in derivatives. In the US, Coinbase Derivatives has proposed rules for perpetual single-stock futures, cash-settled contracts that would have no fixed expiry and would use recurring funding payments to align prices with the underlying securities.
Simon Walls, director of markets at the FCA, said the initiative would be on the positive side of the scales for UK markets, describing its purpose as increasing the use of data and bringing new users to the market. Walls said many investors lack access to complete data on UK share trading, leading them to underestimate the depth of liquidity in London's markets, which he said was three times bigger than the main XLON figure published by Bloomberg. He also said data costs lead some large firms to ration data access internally, producing what he described as sub-optimal outcomes.
The most commonly used data on UK share liquidity is based on the London Stock Exchange's central limit order book, which excludes periodic orders traded at scheduled auctions as well as transactions on opaque venues such as dark pools or those conducted directly with banks. The value of takeover bids for companies listed on the LSE was 27 times greater than the market value of new entrants in the first half of this year, against a backdrop in which a dearth of major London listings, alongside UK-listed firms being taken over or shifting to the US, has fuelled anxiety about the shrinking market.
The UK lags other jurisdictions in this area. The EU has already appointed EuroCTP to launch a consolidated tape for equities in September, while US investors have had access to similar schemes since the 1970s.
The FCA has faced heavy lobbying over the proposals. The London Stock Exchange has warned the changes could push more trading toward opaque venues away from the main exchange, while investment banks have resisted disclosing more of their off-exchange trades. The LSE has separately called for the tape to include data from systematic internalisers — venues run by investment banks to execute trades off-exchange — warning that excluding them would give banks an unfair advantage. Walls said including systematic internalisers would add a valuable data point on where liquidity is available and at what price. Most respondents opposed this idea when the FCA first proposed it last year.
The FCA said it will consult on sharing revenue from the consolidated tape with data providers, despite having said last year that doing so risked making the scheme uneconomical. It will also present proposals to end reporting of some administrative trades from banks' systematic internalisers, and set out expectations for how trading platforms should prepare for potential outages.
Firms currently relying on LSE order-book data alone for liquidity assessments face a widening gap between that figure and the fuller picture the FCA intends to publish through the interim reporter and, eventually, the consolidated tape, once the five-year tender process concludes.
