In a recently released joint statement, the Association for Financial Markets in Europe (AFME), European Fund and Asset Management Association (EFAMA), and German Investment Funds Association (BVI) urge policy makers to resist the pressure to take decisions that will lead to “suboptimal outcomes” during the upcoming review of the Markets in Financial Instruments Directive (MiFID/R). Instead, the approach taken should be “evidence-based” and “ambitious”, “even if that means that more time will be required to complete the negotiations”.
The statement mentions the key role the MiFID/R review plays in setting up a Capital Markets Union (CMU) that “works for investors and issuers” and is “fundamental to ensure that EU capital markets across asset classes are more integrated and competitive globally”. The EU would be “at a disadvantage to other global markets” should policy makers fail to pass legislation that can stem investment flows leaving the EU.
The statement highlights three areas where effective legislation is important:
• Equity markets – More needs to be done to encourage EU companies to take their IPOs within the EU instead of outside of it. Market liquidity is a “key consideration” for these companies, so rules should be made with this in mind. Market participants have also stated the need for a consolidated tape with five levels of real-time pre-trade data at a reasonable price, which policy makers have so far failed to deliver.
• Fixed income markets – According to the statement, “fixed income markets that are liquid and attractive globally are also a key underpinning for a successful CMU”. Therefore, bond market transparency frameworks should “address the challenges arising from future evolutions in the regulatory environment outside the EU”.
• Market data – The prices of market data need to be based on the cost of production. “Value-based pricing should be disallowed”, the statement says, in order to “achieve better outcomes for investors and the general public”.