Market structure change is not the way to integrate European capital markets, industry bodies have argued, warning that such changes would give an impression of instability in the region.
Responding to the European Commission’s (EC) proposals on the integration of EU capital markets, AFME stated: “Any radical changes to microstructure would be highly undesirable and risk portraying the EU as being in a state of constant regulatory flux. Especially at a moment when investors – including those newly attracted to Europe in light of recent geopolitical trends – wish to navigate markets characterised by regulatory stability, predictability and consistency.”
It added that such changes would result in implementation and compliance costs for market participants.
Norges Bank Investment Management agreed that structural change was not the right path for European integration.
“The targeted consultation paper emphasises mechanisms to aggregate equity trading liquidity to create a European liquidity pool. We argue that market forces will lead to further market integration if the fundamental impediment of regional segmentation is diminished,” it stated.
“Further integration should be a consequence of increased competition, innovation and transparency in trading markets and not a result of additional regulatory intervention in the trading system.”
The group noted that the upcoming equity consolidated tape, expected to go live in 2026, would be a more effective mechanism to improve fragmented market liquidity.
While not addressing potential market structure changes directly, the Investment Company Institute (ICI) called for supervision to be harmonised rather than centralised, with national competent authorities coordinating their practices supported by ESMA.
This was echoed by Dansmarks Nationalbank, which advocated for harmonisation and the use of regulation over directives.
“We therefore support efforts to simplify and reduce the regulatory burden, provided that the core pillars of the regulation are preserved and not watered down,” it stated.
“Proposals to simplify the regulatory framework must be based on comprehensive impact assessments and evidence, taking into account an EU as well as national perspective, and where the benefits of regulatory changes, in terms of simplification, outweigh the potential costs.”
