As the UK’s fixed income consolidated tape prepares for its June launch, Sassan Danesh, CEO of Etrading Software, the Consolidated Tape Provider (CTP) for the market, spoke with Dan Barnes about timelines, data quality, global demand, and the ecosystem being built around one of the bond market’s most anticipated infrastructure projects.
The DESK (TD): What’s the current timeframe for deployment of the UK’s consolidated tape (CT) for bonds and what’s the timeframe for associated services?
Sassan Danesh (SD): The launch of the tape in on track for 22 June. That date is a singular point, but the tape itself will continue to evolve.
Data quality is a key area that we’re focused on. Prior to going live, a limited amount of data quality testing algorithms can be deployed, because we have no official historical data to back test. We’ve got the RTS 2 post-trade transparency data, but the quality of that is not as high as we want to achieve with the tape. So, we expect go-live will have an initial set of data quality checks, and as we start to build that data set out, we will add additional testing algorithms, and refine and tune the algorithms that we already have, to continually increase quality.
We’re splitting the next 12 months into the go-live itself, followed by a three-month period where we’re bedding down the service, and then another nine months where we then start to optimise the service. We expect that, during that period, both implementation of additional data quality checks, as well as refinements of the ones that we have.
We have had demand from across the globe for the UK tape, reflecting the global trading activity in UK markets. We’ve got US Treasuries, US credit, LatAm, Asian and emerging markets debt. Whilst the tape itself has a regulatory mandate to operate during UK market hours, we want to operate on a 24-by-5 basis in order to capture this additional demand that was not foreseen at the time of the tender design.
To support that, from the beginning of next year, we’re going to create an ecosystem of support organisations to service the user base. The CTP will provide a help desk during UK market hours. We’re going to publish draft details of the accredited partner programme on the 24 May, and we will then publish the final versions early July. ETS’s commercial service will definitely apply to provide such a help desk to ensure 24-by-5 cover, and we expect other redistributors to step forward as well.
TD: Who will be able to access which services, and how will they access them?
SD: The entire bond trading community seems to be interested, both sell side and buy side, from the largest to the smallest organisations, from the systematic traders who are very data driven, to those desks which are more qualitative. They all want to have that transparency of what’s happening in the marketplace.
Users who have any kind of experience of the US market are naturally warmed up to the idea that, actually the tape – and not just in the UK, eventually the EU as well – will be as ubiquitous.
Redistributors will play a critical role, because they have specific types of clients that they can focus on and add value to the tape in a way that makes sense to that constituency. So, ETS’ commercial service is taking the UK tape, adding the RTS 2 post-trade data from the EU, de-duplicating across the two where there’s a counterparty from UK and EU trading together, and then enriching it, for example, from price to yield and various other analytics.
We wouldn’t be surprised if there’s a redistributor with a domestic US marketplace that is interested in off-the-run US Treasuries, where the UK transparency regime is really transparent, tick by tick, which today does not exist in the US.
TD: How is market feedback being built into the offering at the moment, and what’s the process going forward?
SD: We have a formal governance process, with a Consultative Committee that will provide feedback on the evolution for all the different aspects that the tape needs to be assessed. The Consultative Committee has 20 members, where 11 of them are users, with a selection of vendors and a selection of data contributors and one academic.
We were very deliberate when we were selecting and designing the Consultative Committee structure to make sure that it was a representative sample of the stakeholders that we expected from the tape, in order to incorporate the diversity that we’re looking for.
When the UK markets regulator, the Financial Conduct Authority (FCA), designed the CTP model, it fixed the specific model at that time, and bidders engaged on that basis. It is likely that the market will evolve over the course of the five-year contract term. As the market evolves, the question is what is the flexibility for the CTP to evolve with that market? It’s something that we absolutely want to make sure that the Consultative Committee is part of the discussion around. The 24-by-5 model is a classic example — something that wasn’t in the original market hours mandate.
TD: How would you characterise the change in data quality expected to be seen by market participants, and what can they do to optimise that effect for themselves?
SD: We’ll be publishing data quality metrics from the tape from day one, on a monthly basis, aggregated and anonymised in order to provide comfort to data contributors that there’s no naming and shaming going on. We probably will break them down by authorised publication arrangements (APAs) versus trading venues at that level. The publishing of this kind of data quality stats for the first time will in itself provide comfort to users, and we expect the data quality to be improving over time.
We also want to publish the full suite of data quality validation logic that the tape provides, effectively open-sourcing it. If anyone feels that it can be done better, come and speak to us. We think this crowdsourcing model can be super, super helpful.
The tape, when it publishes the record, will have a flag to say if a trade looks potentially erroneous. What we want to do is to provide enough detail in our open-source release that third parties can reproduce the logic, and they can then enrich the tape’s data sets with additional information for their customers such as which validation check was triggered and just how wide was the deviation that caused the trigger. ETS’ commercial service will provide this level of insight to the market and we fully expect other redistributors to do the same.
We definitely want to do this in a way that is non-discriminatory and any redistributor can do it, because we think these are the kinds of areas where specific redistributors, based on their user base, can target very specific additional analytics to provide insights that otherwise the generic, plain vanilla tape would struggle to do for all its user base. We’re comfortable that over time, the tape data is going to get better and better.
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