Market participants have had their say on the EU’s Market Integration and Supervision Package (MISP), part of the Savings and Investments Union (SIU), with exchanges particularly vocal about the importance of protecting lit markets.
The European Commission’s feedback period for its adoption of the package closed on 20 March. Global Trading has previously reported on Euronext’s bold MISP response, which approved of plans to create a pan-European market operator regime and of initiatives designed to improve competition liquidity and investor choice but argued that the initiative should focus more on the shift away from the lit market.
“Given that this trend is reinforced by regulatory asymmetries, more impactful measures are needed to rebalance the framework and ensure level playing field across execution venues,” the exchange group giant stated.
Its statements were accompanied by aggressive data cost hikes.
READ MORE: Euronext declares war on alternative venues with 900% data fee hikes
Euronext is not the only exchange to mount a defence of lit markets in its MISP response.
Nasdaq also highlighted the importance of establishing a framework that protects the efficiency and functioning of transparent lit markets, and warned that tick-size asymmetry between lit venues and systematic internalisers must be addressed.
It also opposed MISP’s proposals to identify the European best bid and offer prices of trading venues and provide trading book depth in the consolidated tape.
“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,” the proposal states.
Nasdaq argues that depth-of-book could create false transparency, disseminating stale data, and that SIs and dark pools would gain a “free intelligence advantage” through order book data and draw market participants away from lit markets.
“If transparent and open venues are required to contribute more granular or additional data to the tape, the CT’s revenue sharing mechanism must be reviewed to ensure these venues are fairly compensated for the data they provide,” it added.
SIX, by contrast, advocated for the inclusion of SIs in the tape to improve bilateral transparency. However, it listed further transparency measures that should be taken.
These include the reintroduction of public reports, the publication of off-venue volumes by ESMA, and the harmonisation of transaction flag applications.
“Without clear identification, we fear it becomes challenging to accurately measure how much volume individual SIs internalise or how this affects price formation on lit markets and retail execution,” the exchange said.
“Liquidity provision off-venues has evolved over the past few years as order flow becomes more electronic and access to quotes becomes easier. Therefore, a thematic review of off‑venue liquidity and better supervision of such mechanisms would be useful. Oversight and due diligence should apply to off‑venue liquidity to the same standard as on‑venue activity.”
