The sidelines of live events (remember those?) are often where the real action happens, where big deals are struck and big ideas are shared. It was in Barcelona in 2019, on the sidelines of the Fixed Income Leaders Summit, where Paul O’Brien remembers sharing his idea for an industry-driven data platform with six or seven heads of trading at buy-side firms.

Many of the conversations he had at that event were about the lack of progress toward transparency in the European bond markets, and complaints about the costliness of market data.

“It has been obvious for years that there was clearly a problem around transparency, cost, and data ownership. And it became clearer at that conference, after speaking to several buy-side firms, that there would be industry support for a buy-side data sharing solution,” says O’Brien, who at the time of the conference was head of buy-side solutions for fixed-income electronic trading at MTS Markets.

In the summer of 2020, O’Brien quit his job at MTS to start Glimpse Markets, which bills itself as a network of buy-side institutions pooling bond trading data.

Glimpse is not the only vendor that has emerged recently with the proposition of sharing data amongst asset managers at low cost. In late May, Chris Murphy, CEO and co-founder of Ediphy Analytics, a division of Ediphy Markets, called on financial firms to support the development of a project the vendor is initiating for a post-trade consolidated tape. 

In a statement, Murphy said the tape would be run as a utility on a cost-recovery basis, and that “regulatory engagement will ensure that we resolve outstanding issues related to data access and data quality.”

Fund managers ING, KBC, and Groupama Asset Management are supporting the initiative.

An opaque landscape

These vendors are emerging into the vacuum forming for fixed-income market data. Technology, downward pressure on margins, and regulation driving previously over-the-counter (OTC) transactions onto lit venues have pushed electronification in fixed income over the past five or so years. The advantages for the buy side are improved price discovery and greater efficiency in trading processes; electronic platforms like Bloomberg, Tradeweb, and MarketAxess now offer rich data. But as the OTC markets become less manual, participants’ grumbles are starting to echo those of their equities counterparts: Market data, they say, costs too much.

Some market participants have pinned their hopes on a consolidated tape for bonds—a cheaper, centralized source of market data disseminated to market participants. The European Commission (EC) calls it “a central database, which aggregates the various post-trade data sources into a single view.” US securities market regulation provides for tapes both in equities and fixed income. In the latter asset class, the Trade Reporting and Compliance Engine (Trace) disseminates transaction data for a range of instruments in real time. In the EU, the revised Markets in Financial Instruments Directive (Mifid II) makes legal provision for a consolidated tape, but none has emerged in any asset class.

Mifid II’s supposed ‘Big Bang’ of data was something of a damp squib as APAs and data vendors just had to make data ‘machine readable’ with little to no consistency in formatting, hampering the buy side’s efforts to find and consolidate huge data sets.

Mike Poole, Jupiter Asset Management

This is mostly because Mifid II does not mandate the submission of data, as US law does, and many vendors argue there is no real business case for them to throw their hat in the ring as a consolidated tape provider (CTP), much less the multiple, competing CTPs for which lawmakers were hoping.

Bond trading associations like the International Capital Markets Association (Icma) say the post-trade data landscape is still as fragmented as it was before Mifid II, if not more so, with data scattered across the Mifid II-created Approved Publication Arrangements (APAs).

“Mifid II’s supposed ‘Big Bang’ of data was something of a damp squib as APAs and data vendors just had to make data ‘machine readable’ with little to no consistency in formatting, hampering the buy side’s efforts to find and consolidate huge data sets,” says Mike Poole, fixed-income dealing manager at Jupiter Asset Management.

Poole says a commercial CTP would have emerged by now if it were a commercially viable proposition.

Currently, the asset manager relies on datafeeds from vendors like Bloomberg, Neptune, MarketAxess, and Tradeweb, some of which are consumed by its order management system (OMS), BlackRock’s Aladdin. “The fragmented nature of these data sources and lack of standardization for how post-trade data is delivered and therefore consumed is one of the major ways in which a consolidated tape could help add transparency to current workflows,” Poole says.

Glimpse of data ownership 

In this context, the start-up Glimpse Markets has emerged. Glimpse is trying to form a network of buy-side members that will share their data, and get paid for it. Glimpse collects corporate bond and emerging markets data from these firms, including data on whether trades are process or portfolio trades, and executed on- or off-venue. 

“The buy side typically collects this information in their OMS, which is fed by the main trading platforms,” O’Brien says. ”We only pool data that the buy side is entitled to re-distribute so no special permission or licenses are required.”   

Says one fixed-income trader with knowledge of the Glimpse offering: “Basically, you contribute your trade data anonymously. You don’t know the counterparties that are behind it, and then in return, you get to see an aggregated dataset,” adding that anyone who contributes data to Glimpse can become an “owner of the data.”

O’Brien says firms are frustrated that they trade bonds on various platforms, which then repackage that data and resell it back to them, and the wider market. Glimpse intends to make data available for free to members, who will be paid for their contributions on a pro rata basis, according to the number of trades and total volume of data contributed.

Only members will have access to T+1 aggregated execution data. However, O’Brien says Glimpse plans to offer data products to other customers, such as sell-side firms and market operators, once it has fully launched. 

“We might repackage and create additional products on the back of this aggregated data, which we can resell to the wider community, but this will always be done in a manner that is responsible and transparent to our members,” he says. 

Glimpse has so far signed up four buy-side firms—Allianz Global Investors, Groupama Asset Management, Exoé, and another that O’Brien can’t name at this time—and is negotiating contracts with more. O’Brien says Glimpse will launch by the end of this year.  

“We are solidifying our founding member group, which will probably be in the region of 10 to 15 asset managers,” O’Brien says. “We are going through the legal process now, and we are approaching the finish line with a group of firms.”

One of the funds showing interest in the initiative is fixed-income specialist BlueBay Asset Management. 

“Rather than a full consolidated tape, they are working with the buy side to say, pull your data together so you can see each other’s trade histories and what’s happening,” says Stuart Campbell, head of trading at BlueBay.

Glimpse is not a front-end, and will mainly be dealing with raw data to fit into the applications the funds are using for order management, execution management, best execution, and transaction cost analysis (TCA). It is currently in discussion with vendors offering these solutions.  

“Our intention is that our data will pipe directly into those systems,” O’Brien says.

Early steps to a tape

Seeking to distribute market data with regulatory backing can be a significantly longer process than relying purely on gaining critical mass with commercial partners. 

Ediphy is hoping to share post-trade data as a low-cost industry utility, and to complete a viable CTP solution by the end of the European Commission’s ongoing review of Mifid II legislation. 

Its press release says, “as an analytics company, it has no commercial objective to develop a CTP as a profit center. Further, it has no ambition to create another data monopoly, and believes the right solution for the market is one that democratizes the data and makes markets fairer.”

Murphy says his company started consolidating data for its own internal purposes a few years ago and had not intended to become a CTP. “But as we have shown more people what we have been doing with the data and our capabilities, the more they said, ‘Why wouldn’t you come forward as a CTP?’ We looked at the commercial side of things and thought that under the current rules, we can’t find anything that works. But this initiative is something that we can get to work on in the intervening period before the commercial rules change,” Murphy says. 

Under Mifid II’s technical standards, APAs make details of executed trades available for free 15 minutes before they publish them. Ediphy collects this free data, which includes instrument codes, timestamps, trading price, and execution venue. 

Murphy says he expects the commission to make changes to the rule that mandates data be made free after 15 minutes. In fixed income, where instruments are traded relatively infrequently, this requirement undermines the ability of a CTP to cover costs, he says. “Most users will think the free data is sufficient, reducing the number of paying users, and driving the unit cost of this up further,” he says.

I was encouraged with the initial idea; I believe there is merit in the proposal, and with the right uptake from market players, it offers a glimmer of hope, finally, for a consolidated tape. I feel there have not been many others that have come to the market with a proposed solution. And several years since Mifid II, my expectation was, and I think the regulator’s expectation was, there would have been some offering out there. Stuart Campbell

Stuart Cambell, BlueBay Asset Management

Until then, Ediphy is working to clean this data so that once the rule is changed, it can offer a commercial tape.

Murphy says the vendor will not charge for data. The first phase of the initiative aims to just provide consolidated data to its participants, which they will themselves assess for quality. In subsequent phases, the project will design a commercial CT according to the provisions coming out of the Mifid review. Early adopters of Ediphy will be sharing data, helping to analyze and clean it. 

“Our suggested commercial model for the final CT is that GUI information should be free, but there should be a minimal charge for API access to cover the costs of operating the CT,” Murphy says. 

BlueBay’s Campbell says he has met with Ediphy to discuss the project.

“I was encouraged with the initial idea; I believe there is merit in the proposal, and with the right uptake from market players, it offers a glimmer of hope, finally, for a consolidated tape,” he says. “I feel there have not been many others that have come to the market with a proposed solution. And several years since Mifid II, my expectation was, and I think the regulator’s expectation was, there would have been some offering out there.”  

Campbell says the fixed-income market wants an initiative like Ediphy to succeed—though it would have to be cheap. “If [a vendor] would come to me and say, we have a possible solution, and it’s going to be $25,000 a year, then I may be interested. If they come and say it is going to be $200,000 a year, then I’d probably say I don’t need it,” he says.

More market fragmentation? 

Ediphy and Glimpse present two different approaches to potentially solving the buy side’s need for greater fixed-income transparency. While Ediphy is seeking to go through regulatory engagement and support to try and become an official CTP, Glimpse is more an industry-led initiative that could fill part of the vacuum in the absence of a tape.

Ultimately, however, both initiatives will only be as good as their contributors.

Joram Siegel, managing director, head of fixed-income outsourced trading at Cowen, says the emergence of multiple tapes trying to accomplish the same thing could fragment the market further. “That is just going to prolong the fragmentation, rather than move toward the end goal of having a more efficient operating environment,” he says.   

While he says he likes the idea of a consolidated tape, any provider is only going to be as good as the data it takes in.

“If you only have a handful of contributors to that dataset, then it’s always going to be incomplete, and you are going to be looking for additional data sources to augment your understanding of the depth of the market at that given time. That just leads to continued fragmentation,” Siegel says.

He adds that a consolidated tape is unlikely to happen without regulatory intervention.

Jupiter’s Poole adds that establishing suitable data standards is key to ensuring most market participants are happy with the way the consolidated tape looks, and by extension happy to pay to consume it.

“With trading desk expenditure increasingly being diverted to data solutions, if a consolidated tape does end up requiring desk budget, the provider will need to get it right regarding deferrals and what data is actually made available,” he says.  

WatersTechnology reported in June that an EC official said the commission will be making changes to the text of Mifid II text to allow a consolidated tape to emerge across asset classes.

Tilman Lueder, head of the securities markets unit at the commission, told the Fix European conference on June 23, “We’re still of the opinion that this can be provided by private initiative. We have had many conversations with very motivated actors who are ready for this and who have the technological capability. All they’re basically waiting for is some tweaks to the legislative framework so they can get going.”

Lueder said a regulatory proposal would be put on the statute books in autumn 2022, with “tangible results” in 2023. He said regulators have so far focused on regulating the CTP itself rather than the data contributors, failing to mandate that they feed data to the CTP.