The competitiveness and attractiveness of the EU’s capital markets must be strengthened through the revision of the Markets in Financial Instruments Directive and Regulation (MiFID and MiFIR), according to MEP Danuta Maria Hübner (EPP, Polish), the European Parliament’s rapporteur on the dossier.
“Europe needs effective, understandable and deliverable changes to the current framework to reduce the fragmentation and increase the size, competitiveness and attractiveness of EU capital markets”, she says in her draft report published on Tuesday 19 July.
It proposes amendments guided by four main principles: - reducing fragmentation and cross-border barriers; - levelling the playing field by promoting healthy competition between different execution venues and methods; - allowing EU companies to be competitive internationally and more attractive to investors from the EU and third countries; - encouraging retail participation and strengthening investor protection.
“It is clear that these changes require careful calibration, in the spirit of an overall balanced approach and to the long-term benefit of the EU”, she stressed.
The amendments concern three areas in particular: the ‘consolidated tape’ (CT), market structure and transparency, and the transfer and execution of client orders.
Ms Hübner shared the European Commission’s objective to establish the conditions for the emergence of a CT in Europe for all asset classes (see EUROPE 12840/6). Such a database would allow for the display of real-time prices of financial instruments across the EU, thus reducing fragmentation.
The introduction of a CT for shares may, however, have an impact on the regulated markets. The MEP therefore proposes an exemption from mandatory contributions for markets that account for less than 1% of total average daily EU trading volume or do not contribute to the fragmentation of EU markets.
On market structure and transparency, Ms Hübner proposes a rebalancing of capital market rules by limiting the use of exemptions from the pre-trade transparency requirements in Article 4 of MiFIR. The threshold for the use of these exemptions should be determined by the European Securities and Markets Authority (ESMA) and should not exceed twice the standard market size.
As for the transmission and execution of client orders, the MEP believes that the problems identified by the European Commission regarding payment practices for order flow are symptomatic of a broader issue related to the best execution regime.
The amendments include clearer technical regulatory standards for professional investors and best execution requirements for retail investors.
Finally, Ms Hübner wants to remove transparency requirements that increase the regulatory burden.
To read the report: https://aeur.eu/f/2qg (Original version in French by Anne Damiani)