The European Securities and Markets Authority (ESMA) has published the TRV Risk Monitor, its annual report on trends, risks, and vulnerabilities in EU financial markets. A press release from the authority summarises the findings of the paper – “overall risks in EU securities markets are high, and market participants should be wary of potential market corrections”.
Five key risk drivers were identified, including a shifting macroeconomic context, geopolitical uncertainties, and technological disruptions. Despite these challenges, financial market infrastructures and services have managed to do well. Overall equity trading volumes in the second half of 2024 saw a 23 per cent year-on-year (YoY) increase while settlement failure rates have continued to follow a downward trend. The paper attributes the latter to the implementation of cash penalties under the Central Securities Depositories Regulation (CSDR) in 2022.
Nevertheless, market participants should not let their guard down. The paper finds “ongoing significant operational risk to infrastructures generally, including exposure from increasing digitalisation and the use of cloud services in core production processes”.
ESMA chair Verena Ross says, “Market participants need to keep their eyes firmly on growing risks, from possible corrections in surging markets such as cryptos, to the threat of disruption from increasingly sophisticated and frequent cyber-attacks.”
