Market Fragmentation in Europe

The EU can’t see its own prices, and recent reform efforts won’t change that

Europe is giving birth to its first consolidated tape providers (CTPs), centralized systems responsible for aggregating and streaming real-time trade data from across the European Union’s fragmented exchanges. Yes, it is surprising that such a basic market tool is only now being systemically implemented. Without a consolidated tape, people and firms encounter major costs to get reliable information on stock prices in Europe, adding some more investment barriers to EU markets.

European Union Capital Market Fragmentation

A trivial cause of the EU’s general economic underperformance compared with the United States is the forever persisting fragmentation of its capital market. In 1966, the important Segre report identified that “the present shortcomings of the capital markets are due not so much to insufficient savings as to the impossibility of adjusting correctly supply and demand on markets that are too narrow … split up into a number of separate channels.”

Since then, two supposed revolutions have occurred: The European Economic Community has been renamed the EU, and the Capital Markets Union, created in 2014, has been rebranded in 2025 as the Savings and Investment Union.

Despite these groundbreaking name changes, the EU remains a collection of isolated, narrow liquidity pools, and the aforementioned Segre report can rest easy: Most of its never-applied recommendations are confoundingly up to date.

Let us take a look at one particular recommendation the EU has been trying to deal with for decades:

The problem of ensuring that full information is available to investors is a particularly important aspect of the development of a European securities market. … The laying down of rules to ensure continuous flow of information [appears to be necessary]. Simplification and harmonization of the techniques of establishing and presenting quotations would increase knowledge of the markets of other member countries and would encourage arbitrage.

This trivial, rudimentary, recommendation of sharing real-time uniform market data seems a bare minimum considering the more than 500 trading execution points (127 exchanges) that are spread across the EU.

The Price of Opaque Data

Yet, as of today, the different prices of a stock quoted on multiple venues are not shown on a unified tape. Real-time knowledge of stock data—such as the best bid, the best offer or the depth of an order book—is inaccessible to investors unless they pay for costly subscriptions to the multiple venues quoting the stock. The absence of a common consolidated tape fundamentally isolates EU markets from one another, showing investors a patchwork of small capital puddles instead of a single deep liquidity pool. While local specialized participants may find arbitrage opportunities, this foggy environment remains a barrier for foreign capital.

The Contrasting U.S. Model

The depth and efficiency of U.S. capital markets are the direct result of federal regulation designed to eliminate fragmentation. Notably, the 1975 Securities Acts Amendments, mandating the creation of the National Market System (NMS), established centralized facilities that collect and disseminate a unified stream of market data. These data tapes are administered by the Consolidated Tape Association (CTA), a nonprofit consortium of exchanges operating under oversight and regulation of the Securities and Exchange Commission (SEC).

For every protected security, a real-time feed of the National Best Bid and Offer (NBBO) is accessible and even mandated for trading infrastructures, which are prohibited from executing an order at an inferior price. This SEC trade-through or order protection rule is supposed to ensure tighter spreads, market transparency and competition among exchanges. It generates distortions in practice, however, and it may be curtailed or reformed in the future. The point here is that NMS regulation is of course not flawless, but it equips U.S. markets with a unified tape of asset prices, a fundamental tool to synthetically consolidate liquidity spread throughout all the different trading execution points across the U.S.

Europe’s Long March Toward Consolidated Tapes

Half a century after the 1966 Segre recommendations on data transparency, a first legislative attempt at creating European consolidated tapes arose. The 2014 MIFID II and MIFIR Acts (on markets in financial instruments) established a legal status for CTPs. The acts relied on a market-led competitive model, presuming private actors would voluntarily bid for the right to consolidate data.

This initiative failed because the exchanges, the primary data producers, were not legally required to transmit their data feeds at a price that made consolidation viable. Venues had no incentive to abandon rents generated by selling their own individual feeds. Also, the lack of a standardized technical and reporting harmonization across the trading points (formats, timestamps, currencies) rendered the agglomeration of their data economically unfeasible.

Recognizing this failure, 10 long years later, the EU adopted two amending acts, MIFID III and MIFIR review, marking a break from the market-driven initiative by moving to a state-mandated model. The European Securities and Markets Authority (the EU counterpart to the SEC) is now empowered to select a single, exclusive tape provider for each asset class (equities and exchange-traded funds, bonds, derivatives). Under a five-year mandate, these private, for-profit entities (unlike in the U.S.) are charged with centralized aggregation of market data, which all trading venues are now legally compelled to transmit with minimal latency in a standardized format through synchronized clocks.

This new state-mandated model looks like a long-awaited but clear success against market fragmentation in Europe, finally managing to publicly livestream consolidated data and creating its very own NBBO, the EBBO (European Best Bid and Offer). But beneath this apparent win, the reform is compromised by structural flaws weakening the tapes’ utility.

Weakness by Design

First, the absence of mandatory consumption maintains a fundamental disconnect between the data (livestreamed and reliable prices) and the consumers (individual firms and investors). EU firms remain free to source only the data they deem useful. Because brokers are not mandated to purchase or use the tape as an execution benchmark, the “single truth” of the EBBO remains an optional reference. As a result, the legal “Best Execution” standard by which brokers must abide is a hollow requirement, as brokers can continue being blind to better prices fragmented across other venues. Leaving the tape optional kills its core liquidity-unifying feature.

Second, the consolidated tapes are hampered by pre-trade blindness. For instance, the equity tape is restricted to anonymous EBBO snapshots lacking venue attribution. National exchanges successfully lobbied to keep order book depth and venue names exclusive to their proprietary feeds. By ensuring the tape is technically weak, the regulation forces traders to maintain expensive subscriptions to individual exchanges, resulting in an aggregate increase in costs. On a positive note, it should be noted that the European Commission published a regulation proposal last December to review the legislation yet again and try to eliminate this weakness:

Under the current Markets in Financial Instruments Regulation, the consolidated tape for shares and exchange-traded funds does not provide information on the identity of the trading venue offering the best bid and offer price or on the depth of the trading book. Given the importance of this information to users of the consolidated tape, the proposal adds it to the tape. The proposal also enhances transparency on quotes by systematic internalisers for orders originating from retail clients.

Finally, the selection of the CTP reflects an unquestionable conflict of interest. In December 2025, the European Securities and Markets Authority designated EuroCTP as the equity and exchange-traded funds tape provider. EuroCTP is a consortium owned by 16 major European exchange groups—precisely the actors who, to say the least, don’t have any incentive for the emergence of a robust consolidated tape, as they will continue to sell their own quicker and deeper proprietary feeds. Incumbent capture being so evident here, it is safe to say it isn’t a flaw of the EU legislation but a chosen feature.

This brief examination of the final arrival of consolidated tapes in the EU shows the ever-repeating and disappointing path of EU legislation. Usually starting out with a good idea, drowned in decades of state and private lobbying blockades, it finally reemerges on paper, late and stripped of its core characteristics. These new data tapes are a first for the EU, and the progress they could bring should be acknowledged. If “simple” data consolidation is already so difficult to set in place, however, it is difficult to imagine how the 27 EU member states will effectively address more critical market infrastructure issues such as the clearinghouses and central securities depositories of the post-trade environment, decisive players of EU market fragmentation.