European trade bodies are split in their reactions to the European Commission’s proposals on capital market integration, with the European Fund and Asset Management Association (EFAMA) and the Federation of European Securities Exchanges (FESE) taking different views on changes to the consolidated tape model.
The Commission’s proposal advocates for the inclusion of five layers of best bid and offer on the pre-trade tape and venue attribution for each quote within the equity consolidated tape.
EFAMA states that these changes will provide more useful data to users and encourage initial take-up, following recommendations it made earlier this year.
READ MORE: EFAMA’s CT data suggestions “spot on” expert says
However, FESE argued that the adjustments were premature.
“[This] could create arbitrage in trading dynamics, which in turn could lead to adverse effects such as further liquidity fragmentation and deterioration in the price discovery process, without providing any major benefits for capital formation,” it stated.
The federation also drew attention to the inclusion of systematic internalisers in the pre-trade tape, noting that this would increase visibility.
The groups’ opinions also diverged on the increased regulatory remit of the European Securities and Markets Authority (ESMA).
If adopted, the Commission’s proposals would see ESMA take on direct oversight of trading venues significant to the EU economy.
READ MORE: EC proposes mega market integration package, beefs up ESMA remit
“[We] stand with the Commission’s bold ambition to tackle fragmented supervisory outcomes under the single rulebook. The new framework should be clear and agile, leveraging local expertise while ensuring harmonised practices across the EU and avoiding costly, overlapping layers of supervision,” FESE proclaimed in its reaction to the package.
Within its proposals, the Commission suggests that the regulator conduct annual reviews of large asset managers.
“We are deeply concerned that these reviews will allow ESMA to second-guess the decisions of national supervisors. This would introduce legal uncertainty for these asset managers under review, as ESMA could challenge supervisory decisions made by national authorities. Considering that asset managers are well-regulated and there have been no significant supervisory failures, the objective or added benefit of these reviews is unclear,” EFAMA stated in its response.
However, the association commended the proposed introduction of a single EU supervisory data space, and the streamlining of cross-border fund operations.
