Joint trade associations call on EU regulators to think big in MiFID review

Featured in: Best Execution

European joint trade associations have called on EU policy makers to be more ambitious in their review of the Markets in Financial Instruments Directive (MiFID/R), even if it means extending the negotiations.

In anticipation of European Union trilogue discussions taking place this week, the Association for Financial Markets in Europe (AFME), the European Fund and Asset Management Association (EFAMA) and the German Investment Funds Association (BVI) issued a statement calling for an “evidence based, ambitious approach”.

The associations stated that the MiFID/R Review is key to the completion of a Capital Markets Union (CMU) that works for investors and issuers, and is fundamental to ensure that EU capital markets are more integrated and competitive globally.

The EU asset manager, banking and broker associations are urging policy makers to recognise that EU equity markets are lagging behind their peers with EU firms choosing to list outside of Europe to seek better valuations.

The associations said policy makers must consider the impact any rules will have on market liquidity, which is a key consideration for companies seeking better valuations to finance their investments.

Additionally, legislators should look to introduce a consolidated tape for equities that must include 5 levels of real-time pre-trade data and be reasonably priced to succeed.

“EU policy makers already failed to effectively deliver the consolidated tape once, in 2018. We therefore urge the co-legislators and the Commission not to be complacent by conceding to the loudest voices of established interest parties, and to rise to the challenge of delivering efficient, more integrated, and globally competitive EU equity markets.”

In the fixed-income market, the associations said legislation should deliver a transparency framework that protects investors and addresses the challenges arising from changes in the regulatory environment outside the EU.

The associations also called for a strengthening of the protection of data users through making it clear that prices of market data should be based on cost of production and through the recognition that market data is a by-product of trading.

Speaking to Best Execution, Joseph Cordahi, product strategy director for data management firm NeoXam, said: “With the all-important trilogue negotiations for MiFID II just around the corner, these industry association policy recommendations come at an ideal time. The industry bodies are right to highlight EU corporate and sovereign bond markets as areas that need attention.

“With investors scrutinising performance daily, there has never been a more pressing need to address rising data costs in the bonds markets. Take an illiquid credit bond as a prime case in point. Typically, there are a few short weeks where a credit bond trades – and then it just stays dormant until it eventually redeems in some credit fund.

“When it eventually does trade, there is often a huge amount of frustration among dealers having to pay a wide spread which makes it even harder for a set price to be agreed, and consequently for the custodian to provide the correct fee.”

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