ESMA picks Etrading Software for EU OTC derivatives tape

The European Securities and Markets Authority has selected Etrading Software (Netherlands) B.V. as the provider for the European Union’s consolidated tape for over-the-counter derivatives. The EU financial markets regulator said the decision is a step in its effort to improve transparency in OTC derivatives markets under the Markets in Financial Instruments Regulation, known as MiFIR.

A consolidated tape is intended to bring market data into a single consolidated feed for dissemination to users. In this case, ESMA said the mandate covers OTC derivatives, a segment where the regulator has linked the project to the transparency objectives of the MiFIR Review.

ESMA Executive Director Natasha Cazenave said the decision marked progress in the regulator’s wider work on consolidated tapes in the EU.

“Today’s decision represents an important milestone in enhancing transparency in OTC derivatives markets. It is also an important step towards establishing consolidated tapes in the EU and delivering on the objectives of the MiFIR Review,” Cazenave said.

She added: “The consolidated tape for OTC derivatives will contribute to a more transparent and integrated EU market, benefiting investors and market participants across the European Union.”

Selection process and authorisation

ESMA said it chose Etrading Software (Netherlands) B.V. after assessing the company’s application against the requirements set out in MiFIR. According to the regulator, the application showed that the company could meet ESMA’s expectations in areas including data quality, operational resilience and the distribution of consolidated market data.

The selection does not by itself complete the process. ESMA said it will invite Etrading Software (Netherlands) B.V. to apply for authorisation without delay. If authorised, the company will operate the consolidated tape for OTC derivatives for five years.

ESMA said the provider would be under its direct supervision during that period. That supervisory structure places oversight of the tape provider with the EU-level markets authority rather than leaving the function solely to national regulators.

Role in MiFIR transparency agenda

The MiFIR framework sets rules for transparency and market data in EU financial markets. ESMA described the OTC derivatives tape as part of the implementation of the MiFIR Review, which includes the establishment of consolidated tapes in the bloc.

For market participants, the project is aimed at improving access to consolidated market information. ESMA did not announce a launch date for the tape, and it did not disclose additional operating terms beyond the planned five-year mandate following authorisation.

Etrading Software is the selected applicant at this stage. ESMA’s next formal step is the authorisation process, after which the provider would take on the CTP role for OTC derivatives under the regulator’s supervision.

This story draws on original reporting from Finextra Research.