There are some sceptical voices regarding Brussels’ plan to increase transparency in the capital market and investments
ADVERTISING
The EU intends to impose a new financial market data servicepromising transparency and investment, but others fear that it will only create a new monopoly.
Last week (August 28) theESMAthe EU’s securities watchdog, has closed a consultation on services that could be available on the market by 2026, but some fear the move will give exchanges even more centralised power.
The European Union has long hoped to develop its nascent capital markets and hope to better unify a fragmented ecosystem.
Price and volume details of trades
The publication of the details of the price and volume of securities trading – a electronic version of stock price tapes that you see in old movies — could bring transparency, competition and modernity to markets that are surprisingly antiquated, supporters say.
“A true single market cannot exist without a more integrated view of EU negotiations,” the European Commission said in a 2020 action plan for capital markets.
The Commission believes that the ability for financial market participants to compare a stock or bond traded in Paris, Frankfurt or one of the bloc’s approximately 300 regulated trading venues would attract the necessary capital.
It would also be in step with its competitors: the US has had a system in place for half a century, and the UK will soon introduce it.
EuroCTP applies to manage the service
EU laws from 2014 contained provisions for the service, but “nobody asked for it,” Eglantine Desautel told Euronews, citing difficulties in collecting and paying for data from across the EU ecosystem.
Now, thanks to a legal update that went into effect in March, the idea could be financially feasible, believes Desautel, whose company EuroCTP will apply to manage the stock market.
“We are passionate about this project and designing a product that meets customer needs,” Desautel told Euronews.
“The European market is quite difficult to understand. There are many execution venues,” Desautel said, saying the lack of a global view of the market “does not make Europe very easy for investors to reach.”
What if the service excludes competition?
The concern is that the new service will effectively exclude competition, giving more power to already powerful trading venues.
Financial market participants have long complained about the fees exchanges charge for access to data, a topic that regulators have occasionally weighed in on, but the situation could get even worse if asset managers are forced to use the new tape service.
“As far as monopoly is concerned, I think they should be held to a very strict standard of governance, including with regard to conflicts of interest,” he said. Susan Yavari, Deputy Director for Capital Markets and Digital at the European Asset Management and Fund Associationwho fears that ESMA’s alleged tender may just be a fig leaf.
“There is no one else in the running” for the equity service, apart from EuroCTP, he said. “The risks are already there from the tender stage.”
ADVERTISING
Yavari wants EuroCTP to have a board of directors that gives voting rights to potential users of the tape, rather than the current purely consultative structure.
Unique service and consolidated vision
For some, the introduction of competition makes no sense: the idea is to have a single service with a consolidated vision. However, Desautel is keen to stress that his project is open, and is not under the control of existing market operators.
Although it was Created in 2023 by a consortium of 15 European exchanges, EuroCTP “operates entirely independently” from its shareholdersdoes not use their platforms or infrastructure and shares ideas with other parts of the financial ecosystem.
“It could be part of the model to be open to other parties,” he said. “It doesn’t have to be just stock exchanges.”
ADVERTISING
In a statement in May, ESMA said its standards would “help improve market transparency and remove obstacles” to a consolidated EU framework.
Contacted by Euronews, a spokesperson for the regulator said it was assessing the responses received, but declined to comment further.
Bonds
The stocks segment is just one of several new tapes that ESMA has planned. According to Euronews, For other securities, such as bonds, the tape could transform.
“We think it will ultimately drive further electronification of the market,” he said. Chris Murphy, CEO of Ediphywhich could bid for the bond when bidding opens early next year.
ADVERTISING
Far from the popular image of high-tech finance, “the bond market is the last bastion of the telephone and people chatting with each other,” he said. “It’s far from being fully automated.”
Bonds may be less politically charged than stocks, but ESMA’s decisions could still prove decisive, Murphy said.
“We haven’t seen the final rules yet,” he told Euronews. “We don’t know if it will be commercially viable for anyone to bid.”
Financial Market Infrastructure and Disputes
Disputes over how to design financial market infrastructures are not new, nor are they unique to Europe.
ADVERTISING
A few years ago, the Securities and Exchange Commission has unsuccessfully sought to force governance changes at the U.S. Consolidated Tape Association, which Yavari says is also dominated by major exchanges.
But, he adds, the stakes may be higher for Europe, whose reputation for attracting capital is much weaker.
“All investors want to be there (in the U.S.),” Yavari said. “We need to make it as easy as possible.”
ADVERTISING
