FIA EPTA members believe a comprehensive consolidated tape is essential for improving the international competitiveness and accessibility of EU markets to international investors many of whom currently find EU markets too complex and opaque. A comprehensive low cost, real-time, pre-trade CT will support transparency, ameliorate fragmentation and will support liquidity and investor confidence, strengthening EU financial markets. We have limited our comments in this consultation to the organisational requirements as part of the Criteria to Assess CTP Applicants.
FIA EPTA members agree with ESMA that it is imperative that the CTP’s governance model ensures an appropriate level of stakeholder involvement. To support this outcome, we believe the CTP’s governance structure should incorporate the following elements:
- It should ensure that the CTP is held accountable to efficiently deliver CT products that are useful, of high quality, and fairly priced under non-complex fee and user policies.
- A three-tier governance structure would support application of appropriate checks and balances, which are essential so as to avoid giving any group of stakeholders exclusive rights.
- Transparency: The CTP should be held accountable to be fully transparent in relation to its data products and the associated fee and user policies as well as any material changes to these.
- Board composition: The board of directors of the CTP should comprise a majority of independent directors to ensure the broadest range of stakeholder interests are taken into consideration in the boards’ decision making.
- Consultation: The CTP and associated governance bodies should consult on material changes to (the principles guiding) the delivery of the CT data products and fee and user policies by means of a transparent, public and well-governed process.
- Majority stakeholder approval for significant changes: in the event that the CTP wishes to make a material change to its structure or business model, this should require approval of a super-majority of the stakeholder representative body. This is essential given the monopoly created by having a sole CTP and role of the CT as a core financial market infrastructure.
Given the nature of the market participants likely to submit to tender for the CTP, it is crucial that the CTP is held to high standards regarding conflicts of interest management. To ensure there is a level playing field amongst market participants and the CTP does not act improperly, the CTP should implement robust information barriers which amount to complete physical separation of the business of the CTP and the other business arrangements operated by that entity, especially if it has close links to an RM, MTF, APA or investment firm.
Finally, we consider it crucial that the CTP be able to pursue product lines/services that are value-added, for example by providing enriched data products, to ensure its commercial viability and support ongoing incentivization to innovate despite the time limited monopolistic nature of the CTPs appointment.
