Bloomberg, MarketAxess, Tradeweb probe three tech partners for consolidated tape bid

A consortium led by the top three fixed income venues by trade volume—Bloomberg, MarketAxess, and Tradeweb—is deciding between three tech providers to partner with in its bid to win the contract for the bond market’s consolidated tape. The vendors are Ediphy, Finbourne, and Opensee, according to six sources familiar with the request-for-proposal process.

“Those were the three from the get-go,” says a senior executive at a data platform provider. “They’re all familiar with the fixed income world and they are all pretty engaged in it.”

In June, the three venues, which also run approved publication arrangements, confirmed their plans to compete for the consolidated tape role as a consortium. As part of the initiative, they announced an intention to establish an independent company that will operate separately from their core multilateral trading facility businesses, and their aim to outsource the running of the tape to a tech vendor. WatersTechnology first broke the news of the consortium’s intentions in November 2021.

“With our collective expertise in fixed income markets and in operating regulatory reporting entities—notably APAs for Mifir reporting—we are in a unique position to deliver a reliable, efficient, and cost-effective consolidated tape service that meets the needs of market participants and the objectives of the regulators,” the three venues wrote in a joint statement back in June.

Since that announcement, however, the consortium has been running a request-for-proposal to review potential third-party technology and operating partners for the service. Now, sources say, the venues have narrowed their search to Ediphy, Finbourne, and Opensee, and the prospective partners have pitched their businesses plans and solutions.

In response to a request for comment, the three venues said in a joint statement that they are unable to disclose the names of the candidates vying to become the partnering vendor. But, they added, the consortium is continuing to progress with its initiative on delivering the consolidated tape.

“The process to select our independent third-party technology partner is ongoing and we cannot divulge names of participants at this stage,” the statement says.

Esma will need to design the tender process, and no one knows what the criteria are going to be for that. So, there are still plenty of unknowns on that side, and some people are still in stealth mode and waiting to have further clarification before showing their hands

Senior executive at trading technology firm

The European Commission has published its draft proposals for how the tape should be delivered, shedding some light on issues like the mandatory provision of market data from venues to the consolidated tape provider, how data quality will be governed, the review of the deferral regime, and limited information about the commercial model. The clarifications within the draft are what prompted the consortium to publicly announce in June that it would come forward as a candidate to deliver the tape.

But these proposals remain at a draft stage, says one senior executive at a trading technology firm, so until the European Securities and Markets Authority publishes the tender for the tape and specifications are set in stone, it is unclear how the consolidated tape will operate or what it will look like. The executive suggests that, depending on the outcome of the tender, some firms seeking to provide the tape or work with the consortium could still exit the race if conditions are deemed unfavorable.

“Esma will need to design the tender process, and no one knows what the criteria are going to be for that. So, there are still plenty of unknowns on that side, and some people are still in stealth mode and waiting to have further clarification before showing their hands,” says the senior executive at the trading technology firm.

Several sources spoken to for this story predict that the tender process will not begin until the third quarter of 2023 at the earliest, but regulators have not yet publicly stated when to expect it.

WatersTechnology spoke to 10 sources for this story, most on condition of anonymity, and six of whom knew about the three vendors participating in the request for proposal.

Who does what?

It is not clear how the role dynamics between the consortium and the tech vendor will fully play out. Much of it will vary depending on the capabilities of the chosen firm. What is clear, though, is that the venues plan to choose their partner before Esma announces the tender for the consolidated tape.

“We expect the selection process to be completed in advance of Esma’s tender process for selecting the consolidated tape provider for the EU,” the venues say.

WatersTechnology understands that conversations between the consortium and vendors are still in the early stages. Much of what is being hashed out is on a “principal level”, says one source close to the discussions.

The senior executive at a trading tech firm says the venues are seeking a partner that will fulfil more than just a tech role. As Bloomberg, MarketAxess, and Tradeweb are rival fixed income venues, they will need to outsource the running of the tape to an independent partner to avoid conflicts of interest.

“The consortium is not just looking to outsource the technology, but the operational side of things as well. So, it’s more than just tech provisioning,” adds the executive. “If you think about three companies like that working together, you must think, ‘How are they going to staff the operational side of things?’ It’s going to be very difficult.”

Some sources predict that the consortium, via its independent entity, will focus on providing the reported data, funding the tape, and governance. The winning vendor, on the other hand, will be responsible for building the technology and operating the consolidated tape, including ingesting, cleansing, managing, and disseminating the data. Additionally, the third party could be expected to handle commercial duties, such as the administration of contracts, billing, and calculating revenue streams.

“The selected vendor will act as the CTP for all intents and purposes, and as calculation agent,” says the senior executive at a data platform provider. “They go through their business plan with them, they tell them how they are going to operate the tape, and how they’re going to make money.”

Two of the horses in this race—Ediphy, a provider of trading analytics and execution services, and Finbourne, a provider of investment data management solutions—have indicated that they would be bidding to run the tape. Over the past 18 months, prior to the consortium’s request for proposal, both publicly expressed their interest in becoming the operator for the regulatory-backed tape, and their representatives frequently speak on industry event panels about the project.

Opensee offers self-service data analytics for risk and trading. Historically, the firm has focused on developing solutions for risk analytics, but in the past 12 to 18 months it has extended its data coverage to ingest and analyze trading information.

All three vendors have built data aggregation technologies that they would use to underpin a consolidated tape.

How long the consortium will take to select and announce a partner is unclear.

Ediphy, Finbourne, and Opensee all declined to comment for this story. Bloomberg, MarketAxess, and Tradeweb declined to provide any additional information beyond their statement.