A UK CONSOLIDATED
TAPE FOR EQUITIES
The View from the London Stock Exchange
J E S S ICA MO RRIS O N
Head of Market Structure and Quantitative Analysis
Capital Markets Division, London Stock Exchange Group
April 2024
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
2
Contents
The View from the London Stock Exchange
3
UK Market Structure Overview
5
FCA Objectives and the View from the Market
14
Why Latency Matters
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A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The View from the London Stock Exchange
The view from the London Stock Exchange regarding the potential for a UK
Consolidated Tape for equities can be summarised by the following four points.
The growth of the UK markets should be a key consideration of any change proposals. Market data
improvements should be prioritised against the backdrop of the broader regulatory agenda and consider
which measures will most contribute to the goal of making markets function well by increasing the total
amount of activity and liquidity for the benefit of all market users and the broader economy. We also need
to be cognisant of the differences in UK market structure, compared to the US and Europe, given the
unique nature of UK retail activity and the outsized proportion of UK Systematic Internaliser (SI) volumes
in large driven by the distortions created by the UK stamp tax regime.
There is an urgent need for an accurate post-trade tape and agreed volume figures. Accuracy of
post-trade data would enable the buy side to place larger orders and the sell side to ensure they are able
to include the additional available liquidity in volume profiles, moving away from the current venue only
calculations and so help meet the growth objective. Transparency of volumes is essential for the market
to make investment decisions. We recommend that the FCA perform a review of post-trade reporting
accuracy and take action to ensure the quality of this important data.
Feedback from the market is that having agreed volume numbers both in terms of addressable and total
liquidity would be most effective in improving secondary market trading liquidity. We would not want the
FCA to delay the roll out of a post-trade tape while there is a necessary debate around the value of and
risks associated with a pre-trade tape.
The quantity and quality of secondary market liquidity is now central to the risk and investment decisions
made by investors and in turn influences the international listings debate. The ability to inform current
issuers about total activity in their company and prospective issuers about total liquidity in their peer
companies – whether on or off central venues including transparent venue attribution, whether through
a cash equity transaction or via CFD (or delta 1 swap) – is integral to the attractiveness of London as
a destination for IPOs and secondary trading.
A robust use case for a real time pre-trade tape is lacking. With UK lit continuous volumes at all-time lows,
further quantitative metrics need to be analysed to consider the impact on price formation. If price formation
breaks down, it is to the detriment of all mechanisms that use lit order book liquidity as a reference price.
We support the work of the FCA to consider what further quantitative metrics need to be analysed in
order to consider the impact of a pre-trade CT on price formation.
Pre-trade market data is used by the trading community for the placement of orders on Central Limit
Order books (CLOBs) or as a reference price for trades executed away from these venues. For electronic
trading, the market should consider the impact of latency and consider the risks that may be created
pertaining to certainty and quality of execution.
From our study ‘Why latency matters’ contained in a later section of this paper we assess the impact
of latency by analysing data for the full year of 2023 for securities in the FTSE 100 assuming a delay
of 10 milliseconds. We find this small delay would cause the price to be incorrect by an average of 14% of
a spread and the volume displayed on the tape to be incorrect by an average of 37%. In terms of potential
execution outcome, our case study shows this translates to slippage of 14% of an average spread in terms
of weighted mid-point. This demonstrates how using a delayed market data feed for trading would result
in uncertainty in execution outcome and so complicates the ability to demonstrate best execution.
We believe that an accurate post-trade tape could provide the price, volume and venue information needed
for a human trader to get a more complete view of the market given the inclusion of trades executed away
from CLOBs. Members of the London Stock Exchange have indicated that they will continue to trade on
direct feeds as they value precision of execution. Others using pre-trade market data for automated trading
should consider the value of a pre-trade CT given the impact on execution quality and certainty. If the sell
side stay on direct feeds but the buy side move to stale consolidated feeds for automated order
placement, we believe this may lead to a mismatch in expected execution outcomes.
3
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
We do appreciate the interest in a consolidated pre-trade view of the state of the order book for TCA
and historical order placement analysis. However, this information is not often used on a real time, trade by
trade basis to interrupt the execution but is aggregated post-trade to ensure there is a large enough data
set with some statistical significance to act upon. There are a number of vendors that already provide
such data.
A Consolidated Tape (CT) cannot be both operationally robust and low cost. Producing a low latency,
operationally resilient pre-trade feed simply cannot be achieved on a low-cost basis without compromising
quality and therefore its efficacy and reliability. Whilst we agree that there is a need for better market
transparency, we do not see how a pre-trade CT can act as a tradable back-up in case of a lit market outage
and not be subject to the same operational risk measures as venues. The view that a low latency tradable
consolidated feed is expensive is evidenced by the expectation that the cost of the newly proposed US
Securities Information Processor (SIP) (which costs $25–30m per annum to run) exceeds the aggregated
cost of paying for all direct feeds from the US exchanges, and the Oliver Wyman report has estimated
of €98m for the setup of a real time EU pre-trade feed and €38m per annum of running costs.¹
1 Caught-on-Tape-a-consolidated-tape-for-Europe.pdf (fese.eu)
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A UK Consolidated Tape for Equities – The View from the London Stock Exchange
5
UK Market Structure Overview
In CP23/15, the Financial Conduct Authority (FCA) states that it “has a strategic
commitment to strengthen the UK’s position in wholesale markets, including as a
destination for the listing and trading of equities”.² This consultation paper started to
frame the model for the consolidation of multiple market data feeds into one UK tape.
Secondary trading market participants are frustrated by not being able to effectively identify volumes
traded in UK stocks as market fragmentation has led to a significant proportion of business being
executed away from exchanges and multilateral trading facilities (MTFs) towards an over the counter (OTC)
basis. Given how much trading is algorithmic, data quality is essential and understanding whether liquidity
is considered addressable or non-addressable (i.e. volume that market participants have the opportunity
to interact with or not) is instrumental to the sizing of orders being placed and the performance of the
trade execution.
Being internationally competitive rightly means paying attention to global trading models when forming
best practice. However, we want to ensure that the thinking around the value and viability of a UK
consolidated tape pays attention to the uniqueness of the UK market structure. There are significant
differences when comparing the UK to the EEA and the US. The UK does not have the same number of
venues as in the EEA,³ and currently has four lit venues of note (the London Stock Exchange, CBOE, Aquis
and Turquoise) providing pre-trade transparency.⁴ This means the cost and complexity of taking direct
feeds in the UK is more manageable. The unique Retail Service Provider (RSP) model means that UK retail
brokers execute trades away from Central Limit Order Books (CLOBs), and while there are many in the
market that have strong views on this mechanism, at present, arguments for a CT based on the potential
growth of retail activity are not relevant in the way they may be in other regions.
When considered on a market-wide basis, overall trading volumes in UK stocks have actually been growing
over the past decade. Figure 1 shows the volume of trading in UK stocks, regardless of the mechanism
of execution, over the past ten years.
Figure 1: Total volumes in UK securities 2014–2024⁵
Trading volume (no. of shares, bn)
800
Volume traded (LHS)
Value traded (RHS)
700
All London Stock
Exchange securities
All London Stock
Exchange securities
600
London Stock
Exchange securities
ex. FTSE 100
London Stock
Exchange securities
ex. FTSE 100
500
Notional value (£bn)
Source: London Stock Exchange, Bloomberg
2,500
2,000
1,500
400
1,000
300
200
500
100
q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2 CP23/15: The framework for a UK consolidated tape | FCA
3According to ESMA the UK have 2 regulated markets (RMs), 30 MTFs and 19 Systematic InternaIisers (SIs) at the end of 2020 compared
to 9 RMs, 99 MTFs and 47 SIs in the EEA at the end of 2022. ESMA50-524821-2954 TRV Article – Evolution of EEA share market
structure since MiFID II (europa.eu). For the full list of EEA venues see here: ESMA Registers (europa.eu)
4 For the full list of UK venues see the FCA register here: https://www.fca.org.uk/firms/authorisation/wholesale-markets/mtfs-otfs
5 The universe used for this analysis includes all shares and depository receipts currently listed on the London Stock Exchange, it does
not include securities that were listed during the period but have since delisted and it does include issuers which have not been listed
for the full period. While we are aware that introducing new issuers within the period will contribute to the variations in the data, we
believe this does not account for the liquidity trend over time.
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
However, liquidity traded during lit continuous sessions on UK venues is at historical lows with volumes
increasingly being executed away from CLOBs. In 2018, lit continuous volumes accounted for over 45%
of total addressable volumes according to big xyt metrics. As shown in Figure 2 below, according to big
xyt, as of March 2024, lit continuous volumes dropped to 18%. 17% of liquidity trades in auctions or on
dark venues. Bilateral agreement mechanisms operated by market participants such as SIs run by brokers
and liquidity providers and other forms of off venue trading including both OTC, RSP trades and large
negotiated blocks of stock now account for circa 64% of market volumes.
Access to SIs and RSP networks are based on the client relationship with a broker – if an investor does
not have access to a broker, they will not be able to access the liquidity regardless of the introduction
of a consolidated tape. While it is true that SIs need to base their decision to give access to SI quotes
on an objective, non-discriminatory basis, they do retain the right to refuse or discontinue business
relations based on their commercial considerations. This is in contrast to RIEs and MTFs, who, under
the Recognition Requirements Regulations and the FCA ‘MAR’ sourcebook must make transparent
and non-discriminatory rules, based on objective criteria, governing access to, or membership of, their
facilities. RIEs and multilateral trading facilities (MTFs, Turquoise and broker operated platforms such
as Goldman Sach’s Sigma X or Virtu ITG’s POSIT) do not have clients, they have members.⁶
Figure 2: Trading in UK stocks share of addressable liquidity by market mechanism
Source: Liquidity Cockpit UK100 stocks, big xyt
6 Recognition Requirements Regulations relating to non-discriminatory access are referenced in the FCA Handbook, REC 2.7
REC 2.7 Access to facilities – FCA Handbook
6
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
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Although distinct from regulatory policy, one of the most costly aspects of UK market structure is the
regressive stamp tax regime that charges 50 basis points to end investors, but not to Recognised
Intermediaries (RIs).⁷ This explicit cost disproportionately levied on retail and pension funds, both UK and
overseas, has led to significant levels of trading via a Contract for Difference (CFD, spread bet or delta 1
swap), derivative instruments which are out of scope of the tax. According to the Tax Foundation in
January 2020:
“The United Kingdom taxes stock trades while derivatives are exempt. This tax has resulted in the
expansion of the UK derivatives market – contracts for difference (CFD) have been substituted for
equities and now make up about 40 percent of trading in the UK.” ⁸
This CFD activity is not publicly reported and while there is likely a significant proportion of these
bilateral contracts being hedged in the market with the underlying equity, we believe advances in netting
techniques (such as the development of central risk books) to manage risk are such that a significant
proportion of CFDs are not hedged in the market. CFDs reference the price of the underlying cash
equity as the price of the contract. These bilateral contracts are closed liquidity, only the two parties
to the contract can participate in the trade. Where CFDs are matched with each other, a synthetic pool
of liquidity is being created that is separate from the underlying cash equity markets. This syphoning
of liquidity away from cash equity into bilateral captive contracts, that cannot be interacted with on
a multilateral basis, may be causing a further deterioration in the liquidity available to those investors
seeking exposure in the underlying asset.
Additionally, we understand that an increasing number of CFDs may not be hedged with stock but
with an opposing CFD. This ‘internalisation’ of CFDs means there is no market footprint of the activity
either on or off exchange. Anecdotally, we believe that there could be an additional 20–50% turnover
in single stocks through synthetic CFD trading and that around half of that is netted against another CFD.
Only the FCA would be able to verify the numbers through their confidential transaction reporting data.
We believe this activity should be transparent to the market and CFDs should be publicly trade reported
in the same way as cash equity trades.
Interestingly, although volumes have been growing, the revenue received from stamp tax⁹ has remained
largely stable, as plotted in Figure 3. This shows that the growth in volumes has not been from pension
funds and retail who as end investors are the main contributors to stamp tax revenue but has rather
been from the RIs, trading for their own account on a principal basis to hold inventory to facilitate
client activity or to hedge a client derivative.
Figure 3: Stamp tax receipts over past decade
SDRT receipts (£m)
£4,214
£3,801
£4,212
£3,938
£3,553
£3,084
£3,470
£2,918 £3,040 £2,822
£2,701
£2,864
£3,732
£4,153
£3,698
£3,284
£3,012 £3,024
£3,261
£2,263
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Office for National Statistics
7 STSM042050 – Exemptions and reliefs: reliefs: Intermediary Relief (FA 1986 sections 80A & 88A) – general – HMRC internal manual
– GOV.UK (www.gov.uk)
8 Financial Transaction Tax: Analysis of a Financial Transactions Tax (FTT) (taxfoundation.org)
9 https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/timeseries/bkst/pusf
2021
2022
2023
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
We have concerns that the stamp regime, as well as putting a high-cost burden on retail and pension
investors, has distorted the motivations for how and where UK stocks trade to a material degree. Activity
that takes place on an OTC basis away from CLOBs is not open to the whole market and is not truly
accessible.
There are risks associated with CFDs, particularly for retail investors. A report issued by the FCA stated
that around 80% of retail investors lose money via CFDs.¹⁰ Further, the FCA stated that “in 2020 and
2021, FCA action stopped 24 firms marketing CFDs in the UK. The actions in 2021 alone prevented
an estimated £100 million a year of harm to UK consumers. Further FCA action has been taken in 2022
and will continue where justified”. Although the majority of CFD activity in SIs is likely conducted with
professional fund managers (both hedge fund and real money), the FCA also stated that CFDs are often
“highly leveraged derivatives”, warning that “adverse price movements in relevant markets can lead
to substantial losses for consumers”. ¹¹
Again, due to the lack of data in the market, we are not able to confirm the quantum of such activity but
understand it has been a growing trend. It is our belief that if retail were not subject to stamp tax, much
of the retail CFD activity would return to trading the securities directly. The growth of retail investment is a
priority for the government, as well as the Capital Markets Industry Taskforce (CMIT) which will soon launch
a retail workstream. However, retail trading activity is not clearly flagged in the market so measuring any
growth trends is currently problematic. We suggest that requiring the RSP network to apply a trade flag
would again help transparency.
Another angle to consider is the impact that hedging activity has on voting decisions by holders of the
underlying stock. It is market practice for those holding stock as a hedge to a CFD not to vote in Annual
General Meetings and other voting events. The holder of the CFD will also not vote due to tax concerns
that they are seen to be in control of that hedge position and by voting become liable for stamp, a risk
called recharacterisation risk. This further reduces the true reflection of voting habits for companies.
It should also be noted that in times of macro uncertainty and/or unexpected volatility, the market returns
to the CLOB. Figure 4 below focuses on the relationship between lit order books and SIs excluding other
liquidity sources. Below we can see the inverse correlation between lit and SI and how at times where
there were high trading volumes driven by unexpected macro moves or other events, liquidity moves
back to CLOBs. This is in part because the SIs are less able to price risk with sufficient certainty or are
unprepared to commit capital to liquidity provision. The circle on the left shows the liquidity shift when
Covid-19 hit in early 2020, on the right we see a similar move when war broke out between Russia
and Ukraine in February 2022.
10 FCA highlights continuing concerns about problem firms in the CFD sector | FCA
11 What Is CFD Trading And How Does It Work? – Forbes Advisor UK
8
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
9
Figure 4: Lit continuous compared to Systematic Internaliser
Share of value traded
Monthly value traded
€250bn
Addressable market
Lit continuous
90%
Off-Exchange/SI
80%
€200bn
70%
60%
€150bn
50%
40%
€100bn
30%
20%
€50bn
Jan ’24
Oct ’23
Jul ’23
Apr ’23
Jan ’23
Oct ’22
Jul ’22
Apr ’22
Jan ’22
Oct ’21
Jul ’21
Apr ’21
Jan ’21
Oct ’20
Jul ’20
Apr ’20
Jan ’20
Oct ’19
Jul ’19
Apr ’19
Jan ’19
Oct ’18
Jul ’18
Apr ’18
Jan ’18
10%
Source: London Stock Exchange, big xyt
The role of lit venues when markets are volatile is clear. In regulatory parlance, Recognised Investment
Exchanges (RIE), i.e. the London Stock Exchange, CBOE and Aquis for stock trading in the UK Recognition
Requirement Regulations,¹² including paragraph 3 of the Schedule:
– (g) the ability to have sufficient capacity to deal with peak order and message volumes
– (h) the ability to ensure orderly trading under conditions of severe market stress
MTFs are also subject to equivalent provisions under the FCA Handbook, in particular MAR 5.3A.
The costs of meeting these obligations stays constant regardless of the volumes of trades that are being
executed. RIEs and MTFs with pre-trade transparency (such as Turquoise) need to have the correct level
of investment in technology to be able to process extreme levels of message traffic when the market
needs them the most.
There has been extensive debate on how low lit volumes can go before pricing becomes destabilised.
It could well be the case that the UK has the lowest lit volumes globally. While it can be said that price
impact has lessened for investors who access dark MTFs or are able to trade on an OTC basis, this
liquidity is not open to all. The starting position of the London Stock Exchange on price formation is the
liquidity on the lit book should be maintained to a level that provides an optimal trading environment
with equal accessibility for all its members, not just the few who have access to the broadest range
of broker relationships.
The argument to trade away from lit venues becomes circular. As data builds that performance is better
on an OTC than a lit basis, more orders are directed away from lit books. This could increase the market
impact of lit trading, further increasing apparent lit costs, and, in a worst-case scenario, could lead to
the destabilisation of the lit venue price formation mechanism. Further consideration of the correct
characteristics to measure the function of price formation, factors wider than the price impact that can
be observed by trading on CLOBs, should be considered for the development of meaningful metrics
to monitor for deterioration of the lit bid offer spread.
12 2.pdf (fca.org.uk)
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Data accuracy for OTC reporting is concerning. From a secondary markets investment perspective,
portfolio managers are not able to include OTC volumes when considering the size of the shareholding
they would ideally hold in a UK listed company. The significant OTC volumes mean that without having
clarity, it is difficult to add the activity to the volume profile with confidence which could result in the under
sizing of orders placed into the market.
Accurate OTC data would give greater confidence in calculating the volume of activity on CLOBs as a
proportion of addressable market volumes. If portfolio managers could have confidence in the OTC data,
it would allow them to invest more in the market and place larger trades. The result would be real growth
of trading regardless of the mechanism used to execute the trade. It should be explicitly noted that this
growth in position taking would also support investors taking larger long positions in UK listed stock –
supporting their performance.
Upon execution, analysing the execution performance against benchmarks such as Volume Weighted
Average Price (VWAP) or Percentage of Volume (POV) becomes problematic if there is no consensus on
the market volume figure to use. Should it be lit only? Should it include addressable OTC trade reports?
Which trade types should be included as addressable? Extensive work was put in by the industry under
the FIX Trading Community’s MMT committees and consolidated tape working groups to help ensure that
the requirements were in line with market practice.¹³ Changes to post-trade tags as set out in FCA Policy
Statement PS23/4¹⁴ are due to go live on 29 April 2024, which should make it clear which trade reports
are considered addressable. However, without active supervision, the positive impact of these changes
will be limited.
We urge the FCA to make every effort to ensure that the requirement to make timely, accurate reports
are complied with so that this volume data can become relevant to portfolio managers, traders and listed
companies. While the APAs receiving the OTC trade reports do monitor reports submitted to them for
data quality, we would recommend the FCA perform a thematic review on the data quality of reports
being submitted in terms of timeliness, accuracy and application of correct tags after the changes are
implemented in April.
To date, debate on this topic has been kept to a relatively small group of trading professionals and
the associated trade associations as it can become highly complex given its relationship with electronic
trading and algorithmic execution strategies. However, the topic of secondary liquidity has been moving
up the agenda for prospective issuers, and those working in investment banking. Whilst often these
concerns can be resolved by explaining how to find the data, it has come to our attention that there
are some significant, structural gaps which will need to be addressed.
When a company chooses to list and trade in London, they should be able to have an accurate and
complete picture of how much trading activity is taking place. However, as we have outlined, many
investors, corporates and retail investors do not find it easy to see how much trading is happening: partly
because the information that is available is not easy to find and partly due to legitimate concerns around
data quality. Having an accurate, easily available record of trading activity is a key factor in driving forward
the ability for London to be able to compete for and win IPOs, rather than lose them to international
exchanges that are better able to clearly show total trading volumes.
To seek to better educate the market against the backdrop of often erroneous press reporting, the
London Stock Exchange published a blog¹⁵ that shows UK liquidity is in fact highly competitive with the
US when the full range of execution venues are included in volume calculations. It is of great importance
that UK volumes are published in a consolidated way that means those outside of secondary trading can
easily see the activity. It is vital that the market lands on a model that is best fitted to allow for the growth
and valuation of UK companies, to the benefit of the broader UK economy, to help encourage companies
to want to list – and stay listed – on the London Stock Exchange. An accurate, readily available posttrade consolidated tape would address this issue while a pre-trade tape is not relevant.
13 MMT https://www.fixtrading.org/mmt, Trade flag usage https://www.fixtrading.org/packages/fix-trading-flag-scenarios-v-1-0,
Addressable liquidity definitions https://www.fixtrading.org/packages/fix-addressable-liquidity, Post trade transparency recommended
practices https://www.fixtrading.org/packages/recommended-practices-mifir-transparency-vol-1-v3-0
14 PS23/4: Improving Equity Secondary Markets (fca.org.uk)
15 Issuer Services | London Stock Exchange | London vs New York: What liquidity differential? (lsegissuerservices.com)
10
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
11
Thinking of international competitiveness, we now look at the EEA. Although the SI regime applies
throughout Europe, the majority of the SI activity takes place in the UK. According to a report published
by ESMA titled ‘Evolution of EEA share market structure since MiFID II’,¹⁶ over 70% of EEA trades are
executed on exchange post Brexit.
Figure 5: ESMA report for on EEA exchange volumes
80%
2019
2020
70%
2021
60%
2022
50%
40%
Note: Share of annual turnover
volumes in shares by market
type, in %. In 2019 and 2020
the perimeter is the EEA + UK,
in 2021 and 2022 the EEA.
30%
20%
10%
On exchange
SI
OTC
Sources: FIRDS, FITRS, ESMA
Turning to the US, the chart below produced by BMLL¹⁷ shows how complex the US venue landscape is with
many venues trading such low liquidity that they do not feature by name. The chart considers the liquidity for
the top 500 stocks and uses a 13-month rolling average calculation. Again, there is a much lower proportion
of OTC at 26.5%. Lit continuous volumes sit between the UK and the EEA at just under 47%.
Figure 6: Market
Fragmentation in US
Source: BMLL Technologies, FINRA
16 ESMA50-524821-2954 TRV Article – Evolution of EEA share market structure since MiFID II (europa.eu)
17 BMLL Technologies | BMLL Market Lens: US Liquidity Maps
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
12
The US dealt with venue competition through the introduction of Reg NMS in 2005¹⁸ and the
accompanying Order Protection Rules which mean the market must be able to access the best price
regardless of the venue. Infrastructure to onward route orders to the venue with the best price was built
alongside a central consolidated tape, the SIP, publishing National Best Bid and Offer (NBBO) data at
various price points depending on the user type. Those venues considered to be adding information
to the price formation process are paid out based on that data. MiFID went live without an equivalent
structure. The new EEA venues could not rely on an income from a central SIP that paid contributors
or on regulation to send liquidity their way. They had to have an offering that was differentiated enough
to attract trading.
One of the cornerstone arguments provided for needing a consolidated tape is to reduce cost. It is
of note that, according to Nasdaq Economic Research,¹⁹ in 2020 the US SIP cost around $27m to operate.
The SIP works on a model that allows revenue sharing back to the venues who in turn are able to reward
their members for contributing to price formation on their platforms.
Figure 7: SIP costs and revenues
Estimated based on SIP UTP/CTS revenue and population disclosure in 2020
$450m
Type
$400m
Professional
Non-display
Non-professional
$350m
$221m
$212m
Quote query
Other (fixed/media)
Trade revenue
Quote revenue
$300m
Tech/running cost
$250m
$200m
$150m
$45m
$86m
$212m
$100m
$51m
$50m
$47m
Revenue earned
Source: Nasdaq Economic Research
18 SEC.gov | Regulation NMS
19 SIP Accounting 101 | Nasdaq
$27m
Revenue distributed
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The SIP in the US receives revenue of over $450m which means it can afford to pay the $27m annual
running costs. With no clear picture of how many users will be willing to pay for a UK CT, and the heaviest
users of pre-trade data set to remain on direct feeds, it is not clear that there will be a level of revenue
available to support costs before the market can begin to think about a revenue share. Running a platform
with a high level of operational resilience comes with a high cost that remains regardless of the volume
– or value – of data that is being processed and disseminated.
In 2018, a roundtable was hosted by the SEC²⁰ to consider the SIP. Mehmet Kinak, Head of Global
Systematic Trading and Market Structure at T. Rowe Price stated:
“There is no choice there. If a broker is routing using just SIP data they are not routing my flow. They are
not eligible to get my flow, it’s not negotiable. Trading is a zero-sum game and if I’m slower than the other
person I lose – that’s it. And this is a best execution obligation, we are obligated to try and price best
execution with every order that we have.”
Illustrating the perspective of both liquidity providers and those responsible for executing client orders,
Virtu Financial CEO Doug Cifu stated:
“Without proprietary data feeds, there’s not a firm today, either as a market maker or an institutional
agency broker or prop trading firm that can exist. It’s just that simple.”
Rather than importing the issues the US are struggling with, the London Stock Exchange wants to support
products that are actually going to be used by the trading community in their obligation to achieve best
execution, to address the challenges they are facing in the current environment and to maximise trading
opportunity whilst protecting stability. If the aim is to reduce total costs for those making trading decisions,
we must be careful what we wish for or else risk adding a significant cost burden that may not deliver
the benefits that were hoped for.
We have confirmed through extensive engagement that the London Stock Exchange member firms
will continue to trade on direct feeds and the creation of a latency-delayed consolidated CT means
the market may be pushed into paying for a second data feed on top of the cost of direct feeds. Oliver
Wyman estimates that the set-up cost of a real time, pre-trade transparent tape for the EU could be €98m
and puts the ongoing costs at €38m.²¹ The market must think seriously about the reality of this significant
cost in the context of the price they are willing to pay for a CT; how the data will be used; and whether
the model being suggested is the best use of the significant resources that would need to be invested.
The costs of setting up a UK tape could realistically be a multi-million pound expense with limited traction
among the trading community.
We hope readers find this paper constructive, and that the industry can reach agreement to move forward
at the first opportunity with a post-trade tape that gives the market clarity on the total addressable liquidity
available including the activity that takes place away from the CLOBs. While there may be a range of
views on the model, there is a common goal underpinning the discussion and that is the importance of
the health and growth of the UK capital markets. In a time of tight resources for everyone, a higher interest
rate environment and continuing levels of macro uncertainty, we must make sure we use our resources
wisely to maximise the benefit of such a significant investment in the equities industry.
20 Roundtable on Market Data and Market Access (sec.gov)
21 Caught-on-Tape-a-consolidated-tape-for-Europe.pdf (fese.eu)
13
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
FCA Objectives and the View from the Market
The European market has been discussing a Consolidated Tape (CT) since 2007 with the introduction
of venue competition under MiFID. The spirit of free market competition was embedded in the framework
with the ability to choose which execution venues to connect to. Brokers and liquidity providers could
select a venue based on technological innovation, competitive pricing models and both implicit and
explicit cost benefit analysis. The market has certainly evolved since then with a wide variety of models
including those that display activity on their order books through pre-trade transparency (lit venues)
and those that use public reference prices to give price improvement, often at the mid-point of the bid
offer spread (dark venues). Dark trades contribute to price formation by being published to the market
after execution either on a real time basis, or if large enough to qualify for a deferral under the Large
in Scale regime, the following day.
With multiple venues comes the need for multiple data feeds and the ability to consume them. The sell
side developed Smart Order Routers (SOR) to interact with the new competitive landscape and has been
building their own consolidated view of activity in the market ever since. The freedom to choose venues
has been an important reason that in all these years a CT has not been agreed, as each broker may have
a different view of liquidity based on the venues they have access to. While the EU is moving forward
with a consolidated pre-trade tape, take up will remain on a voluntary, not mandatory basis, protecting
this right to choose.
With regards to the pre-trade CT, the model the EU has opted for is for a combined bid offer spread
(referred to as level 1 data) from the exchanges and MTFs without venue attribution. SIs quotes are not
included given they are not equally accessible to the whole market. The UK is yet to consult on the
equities CT and the FCA have indicated that consultation will take place later in 2024. Now is the time
for us to think carefully about the rationale for an Equities CT, and if there is a rationale, the model for that
tape to ensure that it contains the data the UK needs to allow a better understanding of UK secondary
market trading liquidity and remain a globally competitive listing destination.
To best inform our view, we have reached out to the sell side, the buy side (both active and passive),
the liquidity providers and the retail community. There is much fatigue on the topic with comments
like, ‘just get it done so we can stop talking about it’ resonating with many. While we have sympathy with
the need to stop the endless discussions, we must make sure that what we ask for best fits the needs
of the UK market considering the cost of the build against the potential benefits to its users and risks
of unintended consequences.
The starting point must be to properly understand the FCA’s stated objectives as set out in Consultation
Paper 23/15 (CP 23/15): ‘The Framework for a UK Consolidated Tape’,²² Section 1.2 states:
By providing a single, authoritative, complete and affordable source of market data, the CT should reduce
trading costs, increase liquidity and allow investors to better assess their brokers’ execution quality.
Here we consider each objective in turn from a pre- and post-trade perspective and add in anonymised
comments from our market outreach.
Scope
It is important to note the regulatory framing of the question. CP23/15 states:
An equities CT will improve outcomes by enabling a wider set of equities data to be used for decisionmaking in equities trading.
In this context, according to the scope set out by the FCA, decision makers would include portfolio
managers, buy side traders, the sell side that are executing those orders and market makers that provide
liquidity. Following MiFID II and the onus put on the buy side to be able to perform analysis to measure best
execution, referred to as Transaction Cost Analysis (TCA), quantitative data analytics is now embedded
in the pre-trade, in-flight and post-trade stages of trade execution. The scope does not include the wide
range of ancillary services that support, but are not responsible for, trading decision making.
22 CP23/15: The Framework for a UK Consolidated Tape (fca.org.uk)
14
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The FCA noted that the CT should provide three benefits: decrease trading costs, improve liquidity
and better allow the assessment of broker executions. Below we consider each of these objectives in turn
and provide feedback based on conversations with market participants.
1. Reduce trading costs
Market data costs are stable regardless of trading activity given the market participants need to be able
to monitor the state of the order book, connectivity and data processing capacity. When trading volumes
and their associated revenues are low, this cost becomes harder to bear. However, just as the cost of
paying to consume market data is stable regardless of the level of trading commissions being generated,
the cost of producing and disseminating reliable, real-time data is not dependent on volumes.
Given trading is not possible without market data, it is a necessary cost of doing business. From our market
outreach, we have concerns that rather than decrease costs, we believe there is a tangible risk that a
pre-trade CT will in fact increase the market data costs for the majority of the decision making trading
community if they have to pay for two sets of pre-trade data, both direct and consolidated.
View from the sell side
Of the London Stock Exchange member firms we have spoken to, both from the broker and market-making
liquidity provision community, none have indicated that they will move off direct feeds onto a pre-trade CT.
Technology investment is a large part of their competitive edge, and a range of direct market data services
with varying degrees of latency are offered by trading venues, allowing members to choose the cost base
that best fits their execution model. All the member firms we have spoken to have built a consolidated view
of the market already using existing market data feeds, and have restricted real-time data feeds to those
who have an essential need. The majority of those users will be in trading and most ancillary support
services do not currently use real-time data, with the exception of some risk functions.
If the sell side need to start consuming a CT in addition to direct feeds, particularly if the buy side choose
to move to a CT, overall data costs will go up, which is the very opposite of one of the stated intended
outcomes of a CT.
Retail brokers similarly have built consolidated views of the market and consume data from the four
UK CLOBs to effectively price the principal risk quotes that are provided via the RSP network. Quotes
displayed are held for between 5 and 15 seconds and retail investors can view 15-minute delayed market
data already free of charge. As market makers, the efficient pricing of risk is essential to their business
model to provide the most competitive quotes. Given this feedback, we do not anticipate retail brokers
moving away from direct real time feeds either.
View from the buy side
A significant proportion of those that we spoke to, particularly in the active management community, said
they would not replace direct feeds into their Order Management Systems (OMS) as they have already
made significant investments post MiFID II to access the best data available. For example, ‘wheel’ models
have emerged that automate the allocation of orders to a panel of sell side brokers and the proportion
of automated trading has been increasing with execution performance measured through quantitative
analytics. Brokers that provide the best outcomes receive a higher proportion of orders.
Interestingly, several global asset managers that are active in the US markets said they do not use the
US SIP. It is not clear why this would be different in the UK and why there is a perception that firms would
move to using a UK CT to trade.
Below are some of the buy side comments we received regarding a pre-trade CT:
“We can find the information we need in Bloomberg so do not see a need for an additional pre-trade CT.”
“We would stay on direct feeds not just for latency but also for control reasons, we want to be able
to retain the control over which markets feed into the BBO.”
“We have found ways around to calculate size, capacity, risk, position sizing and are not advocating
for a pre-trade CT.”
These comments demonstrate that the potential for a lower cost feed does not necessarily outweigh
the benefits provided by direct feeds. In the active community, there are those that would pay for an
additional pre-trade feed if it were to be launched as they would want to be able to analyse activity driven
by a CT, however this would not mean a reduction in cost, but an increase.
15
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
That is not to say there were not strong supporters of a pre-trade CT, particularly in the passive
management community, but even here the majority expectation was not that a CT would replace direct
feeds but rather would add more data and more transparency. Again, if it is an additional feed, it will not
result in reduced costs. Some referred to a CT as the ‘north star’ that would provide a ‘democratisation’ of
market data. The expectation of these users was the additional latency of a CT would be minimal, the data
would be maintained to a high level of operational resilience and therefore necessary as a back-up in
case of an outage, and yet at the same time would be of significantly lower cost.
Given our experience as a market infrastructure provider, we have concerns that the costs of running
a pre-trade, low latency and highly resilient feed are being severely underestimated by some market
participants. We would encourage the FCA and any potential CT Provider (CTP) to give the market realistic
estimates for the cost of setting up a low latency pre-trade CT, and to speak to users directly to see
who may be interested in paying for a feed if it were available.
2. Improve liquidity
With combined lit volumes at a historic low and OTC volumes playing such a significant role, there is much
frustration in the market that there is not an accurate, reliable view of addressable volumes in the market.
All of those we spoke to, regardless of their place in the trading ecosystem, wanted to be able to use
post-trade data but have concerns that the current application of trade flags may be incorrect, that there
may be duplicate reports in the market, and that APAs are not able to publish trades to the market
immediately if they are not received in a timely manner. At present, post-trade data is not considered by
the market as fit for purpose. With this strong appetite for the data, we believe a post-trade CT product
could be one of the most impactful ways to grow trading in the UK and meet the FCA objective of
improving liquidity and making markets function well.
The perception that addressable OTC volumes cannot be reliably used as currently reported is particularly
damaging for lower liquidity, non-index stocks that could otherwise be considered for investment by stock
picking Portfolio Managers (PMs) were they to have a more complete view of a company’s full trading
volume profile. The poor quality of post-trade data is driving a perception that certain stocks have lower total
turnovers than they do in reality, which we are concerned is inhibiting additional activity on UK markets.
Changes to UK OTC trade flags will come into force in April 2024. This is an important step forward for
the interpretation of addressable liquidity. However, without effective enforcement of the use of these flags,
OTC volumes will continue to be unaccounted for in trading decisions. We therefore urge the FCA to
increase focus on data accuracy for post-trade reporting.
We believe that many of the arguments suggesting a CT would lead to improved liquidity stem from the
Market Structure Partners (MSP) report titled, “The Study on the Creation of an EU Consolidated Tape”²³
which largely draws on interviews with participants in the EU and US. The report highlights that many
retail investors in the EU only access primary markets due to cost pressures. MSP believe that a CT could
enable growth in European liquidity, allowing the retail community to increase volumes by including
liquidity in a CT from alternate venues that are not currently being factored in.
We do not believe an argument for pre-trade data consolidation leading to improved liquidity is relevant
in the UK given the existence of the RSP network, particularly for lower liquidity stocks. The RSP network
has been expanding out of the traditional retail broker community to include larger investment banks and
liquidity providers. Users may see quotes on the RSP from 20–25 brokers in stocks that only ‘trade by
appointment’²⁴ on CLOBs and so, arguably, without further evolution in retail participation and access,
the UK RSP model may currently provide UK investors with tighter pricing than may be possible from any
venue driven market data feed, whether direct or consolidated.
From our conversations with the retail broker community, it also seems that the sell side are already
connected to the four most liquid venues in the UK, and so a CT would not give increased transparency
of on-venue trading volumes for these firms. We have not been able to independently confirm this as
member lists for CBOE and Aquis are not publicly available. We would recommend that the FCA
checks the current status of sell side market connectivity.
23 Full-Report--The-Study-on-the-Creation-of-an-EU-Consolidated-Tape.pdf (marketstructure.co.uk)
24 ‘Trade by appointment’ refers to low liquidity stocks that do not trade continually over the day
16
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
View from the sell side
In electronic trading, the sell side are responsible for breaking the order received from the buy side
(referred to as the ‘parent order’) into smaller slices (or ‘child orders’) that are sent to execution venues that
they consider will achieve the best outcome. The buy side will have a benchmark instruction to indicate
how the performance of the trade will be measured. Common benchmarks used are Volume Weighted
Average Price (VWAP),²⁵ Percentage of Volume (POV),²⁶ Mark on Close (MOC)²⁷ and Implementation
Shortfall (IS).²⁸ Some will value volume capture more highly if they are looking to build a significant position,
whereas at other times orders will be considered more urgent meaning there will be a desire to complete
the execution as quickly as possible (within limits). In the latter case, there may be a higher tolerance to
price moves although there will still be analytics performed to minimise that price impact as far as possible.
For VWAP, POV, IS and other volume capture strategies, an accurate and complete view of addressable
volume is essential to maximise execution performance. From our conversations, we understand that the sell
side are currently basing volume profiles on venue executions only. OTC trades, even those considered
addressable, are not included in the algorithmic schedules deciding the size and timing or child orders.
A post-trade CT could bring a more official view of what total volumes are.
View from the buy side
There was strong agreement on the need for a post-trade tape for UK stocks. Here are some of the
comments we heard:
‘Post-trade data is the only way to improve volumes. Pre-trade data will not make a difference.’
‘There is no consensus on volumes. Different brokers have different views.’
‘Agreement on volumes would be a huge step forward.’
‘Post-trade is not even a discussion, it has to happen.’
Active PMs have volume-based criteria for stock selection, often with a minimum level of turnover
needed, before they will invest. Once a stock is generally considered liquid enough to trade, the desired
size of any given position will need to take trading volumes into account. After the size of the position
is determined, the buy side trader needs to understand the implicit cost of entering into – and the
longer-term exit from – the trade.
A number of the buy side indicated that their brokers encourage them to place larger orders based
on the volumes of CFD activity in their SIs. Post-trade CFD data would give a picture of the addressable
CFD market that they could interact with if they are also trading via CFD. For those trading the cash
equities, CFDs generate hedging activity in the underlying equity, with orders often resting in the
SI of the broker that offers the CFD contract that they could interact with. CFD trading data is completely
dark with no visibility shared to the market. In these days of best execution accountability, this leaves the
buy side trader in a difficult position as they have no data to be able to justify an increased order size.
We understand CFDs could account for up to an additional 20–50% of volume and, if this is in fact true,
lack of data is leading to a significant under sizing of orders.
3. Allow investors to better assess their broker’s execution quality
The wording here shows the FCA are focused on the buy side monitoring of the sell side. Execution
performance analytics referred to in the industry as Transaction Cost Analysis (TCA) is an area that has
boomed in recent years following the higher standard of best execution obligations contained in MiFID II.
With the introduction of trading broker votes, the sell side have a strong interest in ensuring that they are
achieving optimal execution outcomes or else risk being removed from panels. Understanding how their
clients are measuring performance is complex given the buy side view is not standardised. A variety of
benchmarks are used by the buy side to reflect their investment objectives, and a significant proportion
of asset managers have developed proprietary metrics for execution performance measurement.
25 VWAP looks to execute an order in line with the volume that is traded in the market and tracks the average of market execution prices.
26 POV tracks again volume traded and will be accompanied by a price limit that may deviated from the average price in the market.
27 MOC is focused on the end of day closing price and is a popular benchmark for passive managers as their products are usually based
performance against close.
28 IS records the ‘arrival price’, that is the market price at the time the order is received and upon completion of the order, and compares
the difference in execution price achieved against the arrival price. This is a popular benchmark for active managers that are looking
to minimise market impact.
17
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Discussions on performance are most effective when data is comparable. If the sell side are executing on
direct feeds to provide their clients with the best execution performance, but the buy side are measuring
execution quality real-time based on a CT, the underlying data the sell side are being judged on will be
different to their execution data and hence the result will be a variance in some of the outcomes of
performance analysis. For example, if the buy side are taking an arrival price based on a delayed feed,
the time stamps may not align with the sell side who use direct feeds and may see a different available
price in the market. Therefore, the arrival prices may be different.
View from the buy side
In addition to the issues around post-trade reporting data, the buy side we spoke to would like to be able
to recreate a view of the market to contextualise their executions. Again, the nature of the comments we
received are provided below:
‘Pre-trade data may be most useful for TCA, but not real-time.’
‘We would like to see SIs assigned a venue so we can perform venue analysis for TCA.’
‘Clearly defined trade tags would allow us to decide what to monitor. We are often trading blocks and like
to see what is happening in larger trades even though they would not be considered addressable from
an algo perspective.’
While trade performance is monitored on a real-time basis, the feedback we received was that it would
be unusual for individual trade instructions to be amended while a trade is in flight unless the trade was
significantly deviating from its expected outcome. In order for quantitative analysis to be meaningful,
a reasonable set of post-trade data needs to build up; rather than looking at execution on a trade-by-trade
basis, assessment will be based on a longer time frame, typically over a quarter. Executing brokers will
be measured on their performance against a benchmark and will be allocated more or less business
depending on their performance against their peers.
Venue order book information from a pre-trade CT is most useful when assessing whether the sell side
have sent orders to the most appropriate venue as it allows a recreation of the order books on an ex-post
basis. Increased liquidity fragmentation makes venue-specific analytics more important when considering
the overall quality of the execution. However, a lack of venue attribution makes post-trade analytics more
difficult. Venue-based analytics does not need real-time, pre-trade data. From those we spoke to, T+1 data
would satisfy this use case. A non-latency sensitive post-trade CT would greatly reduce the burden on
any prospective CT provider as issues around latency and stability become moot.
What should a post-trade tape look like?
So, the question really is, what should a post-trade tape look like? From our engagement with the market,
we know there is appetite for post-trade data with the following features:
– An official record of total and addressable volume traded. Trades that are below the Large in Scale (LIS)
threshold and so reported on a real time basis should be included in an end of day report. Trades that
are eligible for delayed reporting on T+1 should be added to the volumes of the trade execution date
once they have been made public.
– A real-time feed for trade reports that should be published immediately given the size and price
of these trades contribute to price formation. Fields to be included in the real-time feed:
– Trade type codes as set out by the FCA should be displayed for the market to decide which volumes
are to be deemed addressable.
– Displayed Market Identifier Codes (MIC) for all venue types including SIs. Currently, MICs are only
available to the counterparty of the execution but are not available in public market data.
– A flag to identify trades that have been executed though the RSP network. Given RSP operates
under a segregated ecosystem, a RSP flag would be aligned with venue-based attribution.
– The addition of post-trade transparency obligations to CFDs. This cash-like synthetic trading activity
should be visible to the market to facilitate a better understanding of the liquidity profiles available.
These trades could be included in both the end of day and real time data sets.
18
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Why Latency Matters
P E T E R E FSTAT H I O U
Senior Quantitative Researcher
Capital Markets Division, London Stock Exchange Group
There has been debate in Europe and the UK as to whether latency matters when it comes to a pretrade consolidated tape. As Mehmet Kinak, Global Head of Equity Trading at T. Rowe Price, stated at the
SEC roundtable discussion on the US equivalent of a pre-trade CT, the SIP, ‘If I’m slower than the other
person, I lose. That’s it. That’s the fraction of time we’re talking about’.²⁹ We agree. While we appreciate
the ambition of a pre-trade CT being as close to real-time as possible, it is a physical impossibility for there
to be no latency delay, as pointed out by Nasdaq.³⁰ It is a matter of how long the delay will be and the
most useful metrics for evaluating the potential impact for investors.
Summary of findings
In this paper, we will use a sample of actual data from CLOB trading on the London Stock Exchange
to measure the impact of stale data on order placement and trading outcomes. Taking three stocks from
the FTSE 100, we have analysed the impact of a 10 millisecond (ms) delay in market data and find that:
1. A pre-trade CT is least useful when the market is active. The timings of traded volume correlate with
the times when a pre-trade CT shows stale data. Therefore, presence measured as a percentage of time
over the day is not the most appropriate measure for the usefulness of a pre-trade CT for trading. In this
study, we measure the median time between either price or volume updates for the top of the CLOB
as 2–6 ms for the three stocks, less than the time it would take for a pre-trade CT to update, assuming
a 10 ms delay. Over the full year and for all members of the FTSE 100 the average is 2 ms.
2. The impact of latency on certainty of price results in a price miss of 9–18% of a spread, on average.
Over the full year and for all members of the FTSE 100 the average is 14%.
3. The impact of latency on volume capture results in a volume miss of 22–45%, on average. Over the full
year and for all members of the FTSE 100 the average is 38%.
4. The weighted mid-price combines the price and volume uncertainties. We find 9–19% slippage
in certainty of execution, on average. Over the full year and for all members of the FTSE 100 the
average is 14%.
A pre-trade CT is not suitable for electronic trading without significant impact on certainty of execution.
A human user would have a more complete view of the market, and one that is less prone to uncertainty,
using a post-trade CT with execution data from all sources of trading rather than trying to interact with
data that will be materially different from the state of the order book.
1. Presence as a percentage of time
CBOE argue in their piece Mission Possible³¹ that if you focus on the stability of the tape, or presence,
a pre-trade CT is still of use as the tape would be stable for a high percentage of time over the course
of a day. They suggest that given message events (including order entry, deletion, amendment or a trade
execution) are not evenly spaced over the day, the additional latency is not impactful on the use of a
pre-trade CT for non-latency sensitive users. CBOE agree that a pre-trade CT would not be useful for
latency sensitive market participants and use the example of retail looking at a mobile phone for nonlatency sensitive users. As CBOE states “crucially – the slower the tape, the more misleading it will be”.
The first chart in the CBOE piece was taken from another exchange that had assumed that Best Bid-Offer
(BBO) order book events were evenly spaced throughout the day.
29 Roundtable on Market Data and Market Access (sec.gov)
30 Why Physics Makes a Pre-trade Tape Impossible | Nasdaq
31 Mission Possible (cboe.com)
19
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Figure 8: CBOE Mission Possible, Is EBBO Latent?
Source: CBOE Mission Possible
As CBOE rightly noted, events tend to be clustered around busy times in the day as seen in the
second diagram.
Figure 9: CBOE Mission Possible, Is EBBO Latent?
Source: CBOE Mission Possible
From this CBOE drew the conclusion that the tape would be reliable for the majority of the day (over
99% of the time for the DE40 on average), and thus that the impact of sub-second latency is not relevant.
Following on from the work of CBOE, we consider the impact of latency through case studies based on
actual London Stock Exchange order book data to consider the impact of latency on best execution factors
such as certainty of execution, both in terms of the price available and the ability to capture volume. For
the UK, we consider an assumption of a 10 ms delay as a fast processing time for aggregating direct feeds
into a consolidated feed, an estimate that has been taken from existing consolidation processing times
for the Workspace CT, the LSEG Data and Analytics desktop product.
We have selected three representative stocks from the FTSE 100 index – Shell plc (ticker SHEL), the London
Stock Exchange Group (LSEG), and Fresnillo plc (FRES). SHEL is an oil and gas firm. LSEG is an exchange
operator and financial data provider. FRES is the world’s largest silver miner and a major gold miner.
Mirroring the CBOE approach, below we have three charts showing activity in these three stocks on
28 March 2023, a busy time of year for UK trading, using top of book level 1 data from the London Stock
Exchange CLOB only. The below graph highlights the times when the pre-trade CT would be stale when
compared to the actual market versus the times it would have been valid, over the full trading day. The
red lines are the times when a pre-trade CT would have been out-of-line with the market, which happens
every time there is a change in either the best price or volume on the CLOB, plus the assumed 10 ms
delay. The green lines represent all the other times, when it would have been in-line with the actual
market. Although the chart is predominantly green there is clear clustering of the red lines, particularly
around the US open.
It should be noted that using one lit venue only in the data set most likely reduces the frequency of stale
data and all the uncertainties subsequently estimated, since the additional venues will be contributing
additional uncertainties and a greater number of new events to include in the calculations.
20
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Figure 10: SHEL Time when pre-trade CT data is stale
Source: London Stock Exchange MarketWatch
Since event messages for SHEL have a mean update interval of 297 ms on 28 March 2023, one could
infer that as long as the pre-trade CT latency is smaller, investors will still be able to form a complete view
of the market. However, a mean average assumes an even distribution of events over the day so would
not be consistent with measuring bursts of activity, and counterintuitive to the very point that CBOE is
rightly making: that you cannot average events over the day. A median would better answer the question
of how reliable a pre-trade CT would be rather than the mean as the result is not skewed by quiet times
of the day. When using a median for SHEL, we see the order book updates in 6 ms, a very different story
to the mean of ~300 ms.
For LSEG, the mean time between events is 1,100 ms while the median is 3 ms.
Figure 11: LSEG Time when pre-trade CT data is stale
Source: London Stock Exchange MarketWatch
Lastly for FRES, the mean update time for events is 4,100 ms while the median is 2 ms.
Figure 12: FRES Time when pre-trade CT data is stale
Source: London Stock Exchange MarketWatch
21
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
As the old saying goes, “flow begets flow” and an order book event triggers more activity. Since one
of the goals of a pre-trade CT could be to increase trading activity, we do not agree that measuring the
stability of the tape as a percentage of time, whether at intervals over the day or accounting for bursts of
activity, is the correct way to think of the issue. Instead, we think that the discussion should focus on the
outcomes that investors would actually experience at the times when the CLOB has high levels of activity
rendering the data displayed in a pre-trade CT stale.
Times when a pre-trade CT shows stale data correlate with the timing of traded volume
The charts below show the best bid and offer price (left hand side), and the notional traded per minute
(right hand side), over 28 March 2023. As we are considering order book activity, the traded volume
numbers related to London Stock Exchange CLOB numbers only.
SHEL has the highest notional traded over the day of £120m and generally the tightest spreads of GBX 0.7
(3.1bps). As a very actively traded stock there is consistent trading with occasional moments of significantly
higher activity and a notable uptick when the US equity markets open at 14:30. The times with the largest
activity were immediately after the open, when approximately £2.5m worth of shares traded per minute
and at around 15:45 when over £3m traded in a one minute period.
It is of note that the times of the day when the stock is most actively traded correspond to the times when
the pre-trade CT is least accurate. The traded value between 14:30 and 16:09 circled in black was £49m.
Figure 13: SHEL Price and traded volume
Source: London Stock Exchange MarketWatch
22
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
LSEG traded approximately £16m over the day on lit continuous trading on the London Stock Exchange.
As with SHEL, there is consistent trading activity throughout the day, with occasional periods of markedly
higher activity. The US equity market opening has a similarly pronounced effect on the mean level of
trading activity when compared to SHEL, increasing from the pre-US baseline of £23k to £59k. There is
also notable price discovery occurring around the open, with the price rapidly climbing and falling in the
first 30 minutes of trading. The most active period for trading, circled in black, was between 14:30 and
15:22, when £3.7m notional traded. The two most active periods for LSEG were both around 13:00, where
approximately £400k traded per minute. The next highest activity minutes occur after the opening of US
markets, with highs around £350k trading in a single minute.
Figure 14: LSEG Price and traded volume
Source: London Stock Exchange MarketWatch
23
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
In contrast, FRES has a wider and more variable spread and a less smooth traded volume profile. Over
the day, FRES trades less than £1m notional. The notional traded volume profile is the least smooth out
of our three samples, with large and frequent jumps and several periods with no trading activity. There are
particularly significant spikes in the top of book quotes at the beginning of the day as the price stabilises
after the opening, with the spread eventually settling down to approximately GBX 1.0 (18.8bps) by around
08:30. There are extended periods without a trade, particularly between 11:00–13:00 with volume spikes
around the US open at 14:30, when £30–40k worth of shares trade in a one minute period. The region
circled in black, between 14:30 and 16:09, was the highest activity period. During this interval £264k
notional traded.
Figure 15: FRES Price and traded volume
Source: London Stock Exchange MarketWatch
24
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
While we agree that during periods when there are no updates to the book the pre-trade CT would be
in-line with the actual market, it is only valid precisely because there are no new event messages or trades
occurring. As soon as the state of the CLOB updates the tape immediately becomes invalid. The accuracy
of the tape is most important during busy periods, particularly at times of market stress or high volatility,
as that is when the market is most in need of market data that will allow for certainty of execution and the
accurate pricing of risk.
2. The impact of latency on price
The price available for trading, and the spread between bids and offers, will fluctuate constantly
throughout the day. The plots below show how much and how often the price has changed within the
assumed 10 ms after a price update. The spread is shown in pale blue behind and the price misses due to
latency are shown in red for bids and green for offers. The location of the red and green tick marks shows
by how much the price differed between the price visible on the pre-trade CT and the actual price in the
market. Every tick mark that is not on the zero line is a time that the price has changed, either favourably
or unfavourably, before a pre-trade CT would be able to update, and thus represents missed opportunities
or additional slippage. To aid visibility the range of the y-axis has been restricted, as the spread
immediately after the open is typically large and subject to rapid changes.
For SHEL, the spread reached a maximum of GBX 9.0 by 14 seconds after 08:00, before trending down
to the mean value of about 0.8 by around 08:05. The points along the zero line show when the pre-trade
CT would be in-line with the direct market data feed. However, the pre-trade CT often shows a price
difference of one tick and occasionally more. In the case of SHEL the mean absolute deviation of the price
miss is approximately 12% on 28 March 2023 of the mean spread. One can see that the ticks off the zero
line, when the pre-trade CT shows the wrong price, are both common and material. Thus, when a trader
sees the price of SHEL change, and attempts to participate in that price formation process, the price has
often already moved yet again by the time they receive the update.
Figure 16: SHEL Price misses and spread
Source: London Stock Exchange MarketWatch
25
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
LSEG, our example mid-range stock, has a spread profile similar to that of SHEL, around one or two
ticks wide for most of the day. The spread also showed a similar intraday pattern to SHEL, achieving a
maximum value 14 seconds after the open of GBX 48.0. By around 08:15 it had settled into the 1 to 2 tick
wide value that it would maintain for the rest of the day. However, the observed uncertainty was higher
than SHEL’s at 18% of a spread on 28 March 2023. The impact of latency delay has further increased, with
some of the price misses as many as four ticks away from the observed price, compared with a spread
which may only be two or three ticks wide at that moment.
Figure 17: LSEG Price misses and spread
Source: London Stock Exchange MarketWatch
26
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
FRES has the largest and most variable spread of the three in our sample, peaking at GBX 21.8 at 08:00:05
before narrowing and stabilising by around 08:30. The uncertainties for FRES averaged 9% of a spread on
28 March 2023, closer to the equivalent figures for SHEL. Yet, because the spread for FRES was around
25bps, but only 4bps for SHEL, the economic impact of this uncertainty is much greater for FRES than SHEL.
Figure 18: FRES Price misses and spread
Source: London Stock Exchange MarketWatch
As demonstrated in these case studies, investors would not be able to rely on the price they see on the
pre-trade CT. Every time it changes on the screen, the price will often already be different in the market,
by an average of 9–18% of a spread.
3. The impact of latency on volume
It is not just the ability to perceive the price that is impacted by latency, the ability to see and capture
volume is also impacted. Many algorithmic strategies, particularly those that are more passive with a lower
urgency to trade, will try not to move the BBO so will set their volume for taking liquidity as a percentage
of the volume available.
Here we consider the impact of a market data update being received by the consumer of a pre-trade CT
when the volume available at the best bid or offer has already changed – what we describe as the “volume
miss”. For investors with a higher urgency who wish to capture opportunistic liquidity events, participate in
the price formation process, or even just to execute against the volume they see on the screen our analysis
shows they will find that a delayed pre-trade CT materially hampers their ability to do so.
SHEL had a mean volume miss of 22% of the mean top of book volume on 28 March 2023 with a latency
delay of 10 ms. For LSEG and FRES the situation was materially worse at 28% and 44% respectively.
This is of note given the assumption that the less traded a stock is, the less impact a latency delay has.
However, it can be seen for lower liquidity stocks that when activity does happen, it happens in bursts
and arguably has a greater impact as the investor is missing volume when volume is more scarce.
27
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The data for SHEL highlights how outsized volume can be missed using stale data. At 15:45:11, 80,919
shares appeared at the top of the book. Compared to the mean top of book size of around 4,000 shares,
this represents an outsized liquidity opportunity of more than 20 times average available volume. The
market immediately reacts and after just 0.75 of a millisecond aggressive sell orders arrive and start to
match against this order. By the end of the first millisecond, just one tenth of the assumed pre-trade
CT latency, 72,000 shares have already been traded against. By 1.156 milliseconds the whole amount has
traded and the opportunity has been missed. This is a clear example of automated algorithms reacting
to a change in status on the CLOB as the activity is far too quick to be from a human user.
The previous example highlighted the largest volume miss in our case study, but that should not distract
from the average case, where the mean volume miss was 947 shares, or 22% of the mean top of book
size. That is, when an investor sees a top of book volume and wants to size their order to match what they
see, they could mis-size their order by over a fifth.
Volume uncertainty could lead to missed opportunities and worse outcomes for investors. Either they will
not yet see newly available liquidity, and miss the opportunity to capture it by submitting orders that are
too small, or they will experience additional market impact when an order executes against a book that is
smaller than what is shown on the CT.
In the next set of charts, we show the volume miss for the bid (left hand side, pale blue) and offer (right
hand side, pale blue) and the top of book volume displayed on the delayed pre-trade CT behind it in red
for bid and green for offer.
Figure 19: SHEL Volume miss
Source: London Stock Exchange MarketWatch
28
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
29
LSEG generally has fewer shares available at the top of the book when compared with SHEL, with a
time weighted mean of around 250 shares either side. However, there was substantial variation around that
figure, with regular spikes of over as 10 times the mean liquidity available. The investor attempting to take
advantage of that would have to consider the mean volume miss of around 72 shares, or around 28%
of the displayed volume.
Figure 20: LSEG Volume miss
Source: London
Stock Exchange
MarketWatch
For FRES, although there is a lower volume miss profile in absolute terms, the volume miss is still around
44% of the available volume, an uncertainty of 205 shares on a mean top of book volume of around
466 shares.
Figure 21: FRES Volume miss
Source: London
Stock Exchange
MarketWatch
Many strategies are carefully calibrated according to the available liquidity at the top of the book. A delayed
pre-trade CT introduces uncertainty in the amount of volume available by slowing down the market data
updates. This latency causes the investor to see volume that is 22% to 45% different from what is actually
available in the market on a direct feed.
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
4. The impact of latency on weighted mid-price
Having reviewed the impact of latency on price and volume separately, now we review the weighted
mid-price, which allows us to capture the latency induced uncertainty in volume as well as price. We
express this as a percentage of spread to give a metric that indicates potential slippage (whether positive
or negative) compared to expected outcome, or in other words to measure certainty of execution.
Weighted mid-price is a price that sits between the best bid and offer, weighted by the volume on the
opposite side as a fraction of the total top of book volume. We will focus on the mean absolute deviation of
the difference between what the pre-trade CT is showing and what the real state of the market is shown on
direct feeds. The mean absolute deviation is a statistic that measures the dispersion of the random variable,
similar to the standard deviation. We selected a dispersion statistic to focus on as it helps represent the
certainty that an institutional investor will experience when they view the data that is coming from a CT.
By comparing the weighted mid-price after an event update to the true value on the CLOB, we are able
to measure the amount of uncertainty that is induced by the latency in the CT. For SHEL this is around 9%
of the mean spread, for LSEG this is 14–15% of a spread, and 17–19% for FRES.
In the below charts, the top plot shows the difference between the weighted mid-price as a percentage
of the average spread seen on the pre-trade CT and the actual weighted mid-price in the market over
28 March 2023 in light blue. The lower plot shows the top of book notional, bid in red below the line,
offer in green above the line over the day.
The mean top of book volume in SHEL was £95k, but with large intraday variations. Prior to the US open it
was £91k, rising to £109k after. There are large but short-lived volume events, particularly after the US open,
where several moments had top of book volumes of over £1.5m – 15 times the daily mean. However, these
moments are fleeting. Analysing the impact of this using the weighted mid-price shows that the impact of
10 ms of latency causes the mean absolute deviation for SHEL to be 9% of a spread. This means that when
a trader sees a BBO price or volume update and they try to reach out and catch the liquidity that appears
to be available, they will actually end up trading against an order book that is different by, on average, 9%
of a spread. Since volume updates happen significantly more often than price updates, this uncertainty
will be felt very often.
Figure 22: SHEL Weighted mid-price and top of book notional
Source: London Stock Exchange MarketWatch
30
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The top of book notional available for LSEG averaged £20k over the whole day. Much like SHEL, LSEG
has greater volume available after the US markets open, averaging £19k prior to open, rising to £25k after
the open. Although LSEG doesn’t have the same scale of extreme volume spikes as SHEL, the impact
of latency on the weighted mid-price is larger, at 14% of a spread.
Figure 23: LSEG Weighted mid-price and top of book notional
Source: London Stock Exchange MarketWatch
31
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
As the least liquid stock in the case study, FRES has a materially different intraday volume profile.
There are extended periods of essentially constant liquidity punctuated with the occasional shift up or
down. Unlike SHEL and LSEG, FRES experiences less of a liquidity change when the US markets open,
with a mean of £3k available prior to the open that then rises to £3.3k after. The trend of the weighted
mid-price uncertainty increasing as the liquidity decreases continues with FRES, as a 10 ms delay would
have created a 16% uncertainty around the weighed mid-price on the sample days. Thus, even in our case
study, we can see that even small amounts of latency delay significantly hamper the ability of market
participants to accurately capture the dynamic volume that they wish to.
Figure 24: FRES Weighted mid-price and top of book notional
Source: London Stock Exchange MarketWatch
5. Pre- versus post-trade CT
The latency induced by a consolidated tape is unavoidable and so rather than focussing on the fraction
of a day that the tape will be valid or not, investors really need to evaluate how much the benefits weigh
against the unavoidable costs. Perhaps investors will be able to make savings in their data costs by
replacing multiple direct feeds with a single CT. But they might, as the figures above suggest, find their
execution quality falls and they end up having to keep their direct feeds and also pay for a CT. When
making the trade-off between how fast the pre-trade CT should be versus how much it should cost to run,
market participants would do well to consider how even minor increases in latency would impact their
key performance indicators.
As highlighted in the previous section on the View from the Market, some buy side trading desks felt
the pre-trade CT could be close to real-time and so good enough to place orders either electronically or
manually. The main use cases highlighted were being able to look at the screen and decide on price limits
before sending the order to their sell side broker and to assess the potential pre-trade impact of their order
on the market. A pre-trade tape would only include quote data from the lit venues which, as we have seen,
now account for under 20% of traded volumes. Feedback from a number of buy side traders was that,
given the low levels of liquidity on UK CLOBs, a complete and accurate post-trade tape with attribution
to the mechanism of execution, whether on CLOB or OTC, would give a much better picture of total
liquidity to a human or non-latency sensitive use case.
32
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Interestingly, the same buy side institution that was looking for post-trade trading data with venue
attribution also made it clear that they would expect their brokers to be executing on direct feeds as they
understood that execution quality would suffer if based on the delayed CT. This highlights the contradiction
at the heart of the pre-trade CT debate – if humans are going to use it to send non-latency sensitive
instructions to machines, and the machines in turn will make latency sensitive decisions for which
a delayed CT is not appropriate, there will be a mismatch in the data sets.
In the figures below we slightly modify the Price and Traded Volumes charts from earlier, showing the
cumulative volume traded throughout the day for both lit and non-lit mechanisms including OTC trades.
The investor who is only looking at the lit volumes is clearly missing a significant proportion of the total
market volumes. The purple shading shows lit venue trading from all lit venues, the blue all other trading
types. The green and red bid offer spread is London Stock Exchange only still.
Over the full day SHEL trades £167m in lit mechanisms (continuous trading, auction uncrossings and
the closing auction), but £174m in all other mechanisms. After the UK close a further £44.7m was traded,
with activity slowing down until 18:45 when the last trade of £3k occurred. The percentage of value traded
in a lit manner was 49.3% for SHEL.
Figure 25: SHEL Price and cumulative lit vs non-lit traded notional
Source: BMLL Technologies
33
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
For LSEG the split between lit and non-lit volume is even more pronounced than for SHEL, at only 21.5%
traded on lit venues. After the closing auction, a further £26.8m was reported, including the final trade
of the day of £156k at 18:28.
Figure 26: LSEG Price and cumulative lit vs non-lit traded notional
Source: BMLL Technologies
34
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The split between lit and non-lit trading in FRES was relatively closely balanced, with £2.2m trading in lit
and £1.2m in non-lit mechanisms. A further £358k traded after the close of the day, with £17k occurring at
18:06 to mark end of the day.
Figure 27: FRES Price and cumulative lit vs non-lit traded notional
Source: BMLL Technologies
This data clearly demonstrates that a post-trade tape that captures all of these trades would provide
the investor with a more complete vision of where the market price really is than a pre-trade CT that only
includes lit venue data. Whilst work needs to be done for the market to be confident that the OTC volume
reported would be addressable, it is clear that there will be a proportion of this activity that could be
traded against if the data were accurate enough to be relied upon.
As one of the FCA’s stated objectives is to improve liquidity, we would recommend that a tradable
post-trade CT should be the top priority for the market to allow for better sizing of orders and manually
setting price limits. A post-trade CT could succeed in meeting the FCA’s objective by providing investors
with a view of full market activity.
35
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Additional Data
Figures for all FTSE 100 Index Members full year 2023
In this section we find that in aggregate:
1. The price miss is 13.6% of a spread, averaged over the daily average of the members of the FTSE 100
in 2023.
2. The volume miss is 38.0% of the top of book volume, averaged over the daily average of the members
of the FTSE 100 in 2023.
3. The weighted mid-point miss is 14.0% of the average spread, averaged over the daily average of the
members of the FTSE 100 in 2023.
4. The median ms update times averaged over the daily median of the members of the FTSE 100 in 2023
is 2.0 ms, averaged over the daily median of the members of the FTSE 100 in 2023.
Figure 28: Price differences MAD
The following plot shows the mean absolute deviation of price differences, as described in the first
section, averaged over all the stocks in the FTSE 100 index over the full year of 2023. It averages 13.6%
of a spread, with a low of 10.2% on 20 March and a high of 16.0% on 6 December.
Source: BMLL Technologies
36
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
37
Figure 29: Volume miss MAD
The second section demonstrated the impact of latency on the ability to capture volume. The plot below
shows the average volume miss MAD of the FTSE 100 index stocks, over 2023. This averaged 37.7% of
the top of book volume, with a high of 43.8% and a low of 28.3%. The price difference MAD had a clear
seasonal dip in March as did the volume miss MAD.
Source: BMLL
Technologies
Figure 30: Weighted mid-price miss MAD
The weighted mid-price difference had an average value of 14.0% of a spread for the stocks in the FTSE
100 index. It had a high of 15.9% on 14 December and a low of 11.6% on 24 March, displaying similar
seasonality to the other two metrics.
Source: BMLL
Technologies
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
38
Figure 31: Median update time
The median update time of the shares in the FTSE 100 index fluctuated throughout the year, with a high
of 6.7 ms on 13 March and a low of 0.8 ms on 9 January. Over the year it averaged 2.0 ms.
Source: BMLL Technologies
Statistics for all FTSE 100 Index Members
Median
Update
Time
Price
MAD
Mid
MAD
Volume
MAD
BKG
2.2
11%
15%
41%
39%
BLND
9.0
11%
15%
42%
15%
40%
BME
1.8
14%
17%
43%
13%
13%
36%
BNZL
5.4
13%
12%
36%
1.6
16%
16%
41%
BP.
1.2
13%
14%
37%
AHT
1.8
13%
14%
37%
BRBY
4.5
14%
13%
34%
ANTO
1.3
12%
14%
39%
BT.A
1.3
15%
15%
40%
AUTO
5.5
12%
13%
37%
CCH
6.1
14%
13%
38%
AV.
4.0
12%
12%
36%
CNA
5.6
16%
16%
37%
AVV
560.8
20%
3%
8%
CPG
7.9
17%
11%
31%
AZN
3.3
15%
13%
31%
CRDA
2.3
13%
15%
40%
BA.
2.8
16%
14%
35%
CRH
4.6
10%
12%
32%
BARC
0.9
13%
15%
41%
CTEC
32.8
17%
12%
35%
BATS
1.2
15%
14%
39%
DCC
3.2
12%
16%
42%
BDEV
2.2
12%
15%
42%
DGE
1.2
16%
15%
37%
BEZ
21.5
17%
13%
34%
DPH
1,302.3
16%
5%
12%
Median
Update
Time
Price
MAD
Mid
MAD
Volume
MAD
AAF
7.3
15%
15%
39%
AAL
0.9
13%
15%
ABDN
1.5
13%
ABF
3.8
ADM
Ticker
Ticker
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
39
Median
Update
Time
Price
MAD
Mid
MAD
Volume
MAD
NXT
3.2
12%
13%
37%
33%
OCDO
0.6
16%
21%
51%
19%
45%
PHNX
11.3
11%
13%
37%
13%
12%
33%
PRU
1.8
15%
13%
36%
468.4
16%
11%
27%
PSH
23.0
18%
14%
43%
FLTR
5.1
12%
13%
31%
PSN
3.2
14%
15%
40%
FRAS
26.9
12%
15%
40%
PSON
1.7
15%
17%
45%
FRES
1.6
14%
19%
50%
REL
14.8
14%
8%
22%
GLEN
0.5
15%
17%
42%
RIO
1.2
14%
14%
38%
GSK
1.2
14%
15%
41%
RKT
3.2
16%
12%
31%
HIK
1.1
15%
19%
48%
RMV
2.3
13%
14%
38%
HL.
0.6
14%
19%
49%
RR.
0.7
17%
17%
41%
HLMA
7.1
13%
12%
35%
RS1
5.9
13%
16%
41%
HLN
1.7
15%
18%
46%
RTO
3.5
15%
14%
37%
HSBA
1.3
15%
13%
37%
SBRY
3.6
13%
14%
39%
HSV
1,324.1
18%
1%
4%
SDR
3.9
10%
15%
42%
HSX
80.9
15%
12%
39%
SGE
4.8
13%
14%
40%
HWDN
1.3
14%
16%
44%
SGRO
1.4
13%
16%
43%
IAG
4.0
12%
14%
42%
SHEL
4.8
12%
9%
24%
IHG
5.7
14%
11%
34%
SKG
24.4
9%
9%
24%
III
3.7
14%
13%
35%
SMDS
2.8
12%
14%
39%
IMB
4.0
15%
12%
34%
SMIN
7.3
12%
13%
38%
IMI
81.1
12%
13%
34%
SMT
1.4
12%
15%
42%
INF
6.9
13%
13%
35%
SN.
5.5
16%
11%
36%
ITRK
4.0
11%
13%
40%
SPX
7.4
12%
14%
38%
JD.
1.7
14%
18%
44%
SSE
2.0
14%
13%
38%
JMAT
2.6
12%
16%
44%
STAN
2.2
13%
13%
34%
KGF
3.8
14%
14%
38%
STJ
3.3
12%
14%
39%
LAND
4.0
11%
14%
40%
SVT
4.7
13%
13%
37%
LGEN
5.4
13%
11%
32%
TSCO
6.4
15%
11%
30%
LLOY
1.3
12%
16%
41%
TW.
8.3
12%
13%
36%
LSEG
1.3
16%
15%
37%
ULVR
4.5
12%
11%
30%
MKS
2.1
15%
17%
41%
UTG
14.7
12%
14%
44%
MNDI
6.6
12%
12%
36%
UU.
3.7
13%
13%
37%
MNG
4.3
14%
15%
41%
VOD
0.6
16%
19%
43%
MRO
2.6
15%
17%
40%
WEIR
4.9
12%
16%
41%
NG.
4.9
16%
11%
33%
WPP
5.1
12%
14%
38%
NWG
3.2
14%
12%
30%
WTB
4.3
12%
13%
36%
Ticker
Median
Update
Time
Price
MAD
Mid
MAD
Volume
MAD
DPLM
91.0
14%
13%
31%
EDV
4.4
13%
13%
ENT
1.8
17%
EXPN
4.5
FCIT
Ticker
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
Appendix 2: August Case Studies
SHEL
The figure below shows the price misses for SHEL on 15 August 2023. The MAD of these price
differences was 10.3% and the mean spread was GBX 0.70.
Figure 32: Price misses and spread
Source: London Stock Exchange MarketWatch
40
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The figure below shows the price and traded volume for SHEL in August. The circled high activity area
occurred between US Open at 14:30 and 16:29, when £43.9m traded.
Figure 33: Price and traded volume
Source: London Stock Exchange MarketWatch
Below, on the left hand side, we plot the bid volume miss in pale blue and the top of book volume on
the bid in red. On the right hand side we plot the offer volume miss and the volume of the offer in green.
The volume miss MAD was 26.2%, or 803 shares on average.
Figure 34: Volume miss
Source: London Stock Exchange MarketWatch
41
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The figure below shows the difference in the weighted mid-price shown on a pre-trade CT and the actual
market in pale blue in the top chart. The lower chart shows the top of book notional, bid in red, offer in
green. The MAD of the weighted mid-price was 9.6% of an average spread.
Figure 35: Weighted mid-price miss and top of book notional
Source: London Stock Exchange MarketWatch
42
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
LSEG
The figure below shows the price misses for LSEG on 15 August 2023. The MAD of these price differences
was 13.1% and the mean spread was GBX 3.85.
Figure 36: Price misses and spread
Source: London Stock Exchange MarketWatch
43
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The figure below shows the price and traded volume for LSEG in August. The circled high activity area
occurred between US Open at 14:30 and 16:29, when £7.2m traded.
Figure 37: Price and traded volume
Source: London Stock Exchange MarketWatch
Below, on the left hand side, we plot the bid volume miss in pale blue and the top of book volume on
the bid in red. On the right hand side we plot the offer volume miss and the volume of the offer in green.
The volume miss MAD was 48.2%, or 70 shares on average.
Figure 38: Volume miss
Source: London Stock Exchange MarketWatch
44
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The figure below shows the difference in the weighted mid-price shown on a pre-trade CT and the actual
market in pale blue in the top chart. The lower chart shows the top of book notional, bid in red, offer in
green. The MAD of the weighted mid-price was 15.3% of an average spread.
Figure 39: Weighted mid-price and top of book notional
Source: London Stock Exchange MarketWatch
45
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
FRES
The figure below shows the price misses for FRES on 15 August 2023. The MAD of these price differences
was 16.1% and the mean spread was GBX 0.80.
Figure 40: Price misses and spread
Source: London Stock Exchange MarketWatch
46
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The figure below shows the price and traded volume for LSEG in August. The circled high activity area
occurred between US Open at 14:30 and 16:35, when £1.2m traded.
Figure 41: Price and traded volume
Source: London Stock Exchange MarketWatch
Below, on the left hand side, we plot the bid volume miss in pale blue and the top of book volume on
the bid in red. On the right hand side we plot the offer volume miss and the volume of the offer in green.
The volume miss MAD was 49.7%, or 407 shares on average.
Figure 42: Volume miss
Source: London Stock Exchange MarketWatch
47
A UK Consolidated Tape for Equities – The View from the London Stock Exchange
The figure below shows the difference in the weighted mid-price shown on a pre-trade CT and the actual
market in pale blue in the top chart. The lower chart shows the top of book notional, bid in red, offer in
green. The MAD of the weighted mid-price was 22.0% of an average spread.
Figure 43: Weighted mid-price and top of book notional
Source: London Stock Exchange MarketWatch
48
Jessica Morrison
Head of Market Structure and Quantitative Analysis
Capital Markets Division
London Stock Exchange Group
Peter Efstathiou
Senior Quantitative Researcher
Capital Markets Division
London Stock Exchange Group
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