On 20th December 2023, the FCA published a Policy Statement for the framework for a UK consolidated tape (“CT” or “CTP”)
While the Policy Statement (“PS”) was expected, the further consultation was not and there were some aspects that we believe are worth highlighting.
As the momentum behind the CT builds through 2024, the PS affirms the direction and focus that the FCA has on successfully appointing a bond CTP. However, some of the thornier issues are covered in the form of those further “relatively short” consultations.
In broad terms, the FCA re-affirmed their commitment to:
- An aggressive timetable for the procurement of a consolidated tape for bonds – with operationalisation anticipated in “the second half of 2025”[i]
- The appointment of a single bond CTP[ii]
- The original scope of the bond CT (with acknowledgement that ETC and ETNs will have to be examined via the equity CTP consultation process)[iii]
- Ensure that data must be delivered via a standardised, open-source API developed by the CTP (without mandated use of any specific protocol)[iv]
- Allow a CTP to proceed on the basis that any new deferrals regime will be in place prior to operationalisation[v]
- Allow historical (not historic) data to be offered by a CTP[vi]
- Deliver a commercially viable CTP with no requirements to have (i) data available for free after 15 minutes or (ii) to have to offer value added services (although a separate legal entity in the same group may) and a licensing solution that is “simple and easy to understand” during the 5-year contract period[vii]
- Focus on operational resiliency and, through the tender, review any perceived conflicts[viii]
- More clarity on some aspects of any CTP consultative committee’s governance arrangements[ix]
The following 6 points were new elements worth highlighting:
- 8 new questions on (potential) payments to data providers and DSRP forms – a further consultation with “a relatively short consultation window” (9 February) – to feed into “the rules in the instrument .. [which] will come into force on 5 April 2024”[x]
- Deletion of the requirement for a CTP to price on a RCB[xi]
- A clarification that it “was always [the FCA’s] intention that issues of quality of service should be looked at in the first stage of the [tender] process”[xii]
- The retention of the “two-stage tender process” – although there will be some evolution of with the “recognition] that the first stage of the process must get meaningful commitments from bidders on quality which then constrain how they can bid on price. Determining how to achieve this will be an important focus as we develop our framework for the tender”[xiii] – without as noted above the RCB requirement.
- A focus on ”… requiring [CTP] bidders to commit to service level targets on areas such as uptime, recovery time after an outage and the timing of data corrections. [The FCA} will seek to finish the tender design with expert support in early 2024.”[xiv]
- “A CTP should be required to have a complaints mechanism” in common with other financial services firms. The CTP will have to have “arrangements for investigating and resolving complaints using an independent complaints investigator … [however, the FCA] do not think that it would be appropriate for the complaints procedure to involve the possibility of compensation.”[xv]
Conclusion
A certain degree of clarity with regards to the FCA’s approach to a bond CTP is presented in the PS. The market feedback[xvi] has been addressed comprehensively, although the devil will be in the detail of the vital next steps – and promised engagement – that the authority takes in what will be a very busy first four months of 2024.
To learn more about FINBOURNE’s involvement in the CT journey, click here.
[i] §2.44
[ii] §3.11
[iii] §4.9
[iv] §4.24
[v] §4.34
[vi] §4.43
[vii] §5.12, §5.30, §5.31, §5.32 and §5.45
[viii] §6.13
[ix] §6.35
[x] §2.46 and Annex 1
[xi] §6.24
[xii] §5.35
[xiii] §2.35
[xiv] §5.35
[xv] §6.56 and §6.58
[xvi] Annex 2 contains the list of respondents (which includes FINBOURNE)
