The Association for Financial Markets in Europe (AFME) has issued a comment in response to the vote of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) on the MiFIR Review.
Adam Farkas, Chief Executive of AFME, said, “Today’s vote is a significant step forward towards finalising the MiFIR review which governs how financial markets function in the EU. In light of today’s agreement, we are optimistic that the file can be concluded under this legislative term.
“AFME particularly welcomes the constructive approach the ECON has taken in relation to the scope of the consolidated tapes, with its clear proposals to include both pre-trade and post-trade information in the equity consolidated tape, and post-trade information only in the bonds consolidated tape. We strongly urge the co-legislators to retain the design features put forward by the ECON as they are a necessary condition to ensuring the tapes will be as useful as possible for investors and effectively contribute to improving the integration and competitiveness of the EU’s capital markets. We also take note of the emergence of various potential tape providers, which is a good sign that consolidated tapes will effectively materialise once the legislative framework is in place.
“On equity market structure issues, we have consistently argued in favour of reducing complexity and safeguarding investor choice across equities trading mechanisms as this allows for cheaper and more efficient execution to the benefit of end investor returns. The ECON’s approach to restrictions on certain trading mechanisms, such as volume caps and limits on execution sizes and mid-point trading, impede investor choice and best execution. These features remain at odds with international practices and risk contributing to the continued decline of the EU’s attractiveness as a global capital markets centre.
“While the ECON’s approach represents an important improvement on the Commission’s original proposals, AFME continues to be concerned by the relatively rigid approach both co-legislators are taking in relation to bond market transparency. Hard coding corporate bond deferral periods that are not informed by thorough data analysis into Level 1 legislation creates the risk that liquidity provision in illiquid or large sized bond trades will be hampered, particularly during periods of stress. As recent examples of market stress episodes highlight the need for continued focus on financial stability perspectives, we encourage the co-legislators to exercise caution and not – unintentionally – place additional pressure on markets. We also encourage the co-legislators to revisit the deferral framework for non-EU sovereign bonds during the trilogues. At present, they would fall under the corporate bond regime which simply does not cater to the characteristics of sovereign markets.
“As we approach inter-institutional negotiations, AFME urges policymakers to keep the competitiveness and attractiveness of EU fixed income, equities and commodities markets for investors at the forefront of its considerations.”
©Markets Media Europe 2023
