The intention is for a provider to collate all dispersed bonds market data in order to provide a comprehensive picture of all transactions in this specific asset class. According to research cited by the FCA consultation access to a CT “should reduce trading costs, increase liquidity and allow investors to better assess their brokers’ execution quality.”

The context for this consultation is MiFID II, which envisioned creating a competitive landscape with multiple providers vying to supply a CT to benefit end users. The EU has struggled to make progress in this area because of internal disagreement coupled with real challenges around the commercial model.

There was a breakthrough to the impasse earlier this year when 14 European Exchanges announced the formation of a joint venture that would participate in a selection process for a EU CT provider, and another group, led by consultancy firm Adamantia, has recently come forward as an alternative provider.

Competitive European market

An EU CT would make the European market more competitive as an investment destination and is almost certainly an impetus for work on a CT in the UK, which is also intent on strengthening its position in global markets.

The targeted nature of the UK consultation seems to suggest that some consideration has been given to the challenges faced by the EU in launching a CT.

The bonds market has been selected because investors would genuinely benefit from a CT for this asset class. In addition, should a workable commercial solution be found for a CT in this specific context, this and any lessons learned from it could be applied to a CT for equities. Further evidence of the practical focus by the FCA is the lengthy report on the potential economic model written by a specialist consultancy that is being published alongside the consultation.

Data on trades

Also simplifying matters is the focus of the CT and the regulatory framework underpinning it on post-trade data because pre-trade data is not generally available for bonds. This simplifies both the consultation as well as the technical challenges faced by potential providers.

The FCA is proposing that this data should be provided in as close to real time as is technically possible following industry feedback suggesting that data published with a time delay would not be valuable.

Comments on the consultation are due by September 15, 2023, with a Policy Statement to be published in December 2023 and the tender process for the CT provider to commence in 2024.