European policymakers are planning to implement consolidated trading data for various asset classes over the next couple of years, while also banning the practice of paying for order flow. These moves will enhance the trading landscape and represent a positive for banks, brokers and investment firms, says Moody’s Investors Service.
In a new report, the rating agency said the European Parliament approved rule changes that clear for the way for real-time consolidated trading data.
“The [consolidated tape] will provide pre- and post-trade information from regulated trading venues in real time and — for the first time in the [European Union] — will provide a single reference price source for asset classes including bonds, shares and exchange-traded funds across markets,” it said.
Consolidated data reporting for bonds is slated for 2025, with equities and derivatives data coming in 2026 — increasing the quantity and transparency of trading data in the region.
“Increased data transparency will foster clearer price discovery among investors, particularly retail investors,” Moody’s said. This will lead to increased trading activity, boosting liquidity and enhancing secondary markets, which will be a positive for banks, brokers and market makers.
Additionally, the right to operate the consolidated tape for each asset class will be awarded to a single firm for five years, “providing an opportunity for revenue generation,” it said.
At the same time, policymakers adopted a ban on payment for order flow — where market makers pay brokers for retail order flow — which will come into full effect in 2026.
“The ban will be credit negative for brokerage firms that depend on the payment-for-order-flow revenue stream,” Moody’s said, adding that this could lead to higher retail trading commissions at some firms.