Income Sharing Distribution and Operational Incident Reporting for Consolidated Tape Providers (Financial Conduct Authority)

Summary

• The FCA proposes splitting the equity consolidated tape income pool 50/50, reserving 50% for all eligible trading venues and APAs and 50% exclusively for CLOB and periodic auction trading systems.p.6
• The FCA proposes defining smaller trading venues as those whose trades account for less than 5% of the total trade value provided to the equity CT.p.9
• Applying a 4.5 multiplier for smaller venue trades is estimated to roughly triple their proportion of total distributed income from 11.8% to 34.6%.p.10
• The equity CTP will have up to 6 months from the end of the measurement period to make final payments to data contributors, and must issue calculation statements within 1 month.p.16

Key insights

1. Most consultation respondents favoured income sharing arrangements to better align long-term incentives between data contributors and the consolidated tape provider.p.3
2. The proposed income distribution model splits shared income equally between all post-trade data contributors and venues providing lit pre-trade liquidity.p.6
3. Smaller trading venues are identified using a value-traded threshold of less than 5% of total trade value submitted to the equity consolidated tape.p.9
4. Under a 4.5x smaller venue multiplier, estimated income shares adjust to 60.4% for CLOB/periodic auction systems, 24.9% for APAs, and 14.7% for other trading systems.p.10
5. The FCA proposes requiring CTPs to pro-rate payments downwards for data contributors experiencing persistent data quality issues, such as breaching a daily 95% latency confidence interval.p.18
6. Enhanced operational incident reporting under SUP 15.18 will require CTPs to submit initial phase reports as soon as practicable, with an expectation of delivery within 24 hours.p.21
7. To prevent redundant notifications, operational incidents reportable under SUP 15.18 will be exempt from duplicate reporting under MAR 9.p.23