MADRID, 17 Abr. (EUROPA PRESS) -
The Association of European Financial Markets (AFME) has proposed to political leaders that the European market be prioritized over national interests in the European Regulation of the Markets in Financial Instruments (MiFIR, for its acronym in English) and that it be taken into account. account the impact of regulation on the attractiveness of the region's capital markets, as indicated in a statement.
Ahead of the start of the European Union's trialogues on MiFIR, the association has issued a warning about the lack of liquidity in the European stock market and has asked negotiators to consider the impact of this regulation on the attractiveness of the capital markets of Europe.
AFME indicates that European equity markets are "significantly less dynamic and liquid" than their US counterparts, since from mid-2016 to the end of 2022, the capital turnover ratio -- which is calculated as the trading value of stocks relative to market capitalization -- rose 40% in the US, while in Europe it was "flat" flat.
The association points out that the trend of this turnover rate in Europe is explained, to a large extent, by the fragmentation at the national level of the EU markets, which operate under a "highly complex" regulatory framework.
Thus, the European equity market is less than half the size of the US one, but "has three times as many stock groups, ten times as many listing exchanges, more than twice as many trading exchanges, and approximately 20 times more post-trade infrastructure providers. This market structure is likely to be one of the factors motivating high-growth European companies to list outside the EU," the association says.
Therefore, AFME has called on European policy makers to prioritize the competitiveness of the EU equity market by creating a "consolidated tape", in technical terms, "centralized, ambitious and consolidated pre-trade ", which in practice would mean a data entry gate shared by all markets to achieve greater liquidity.
In this regard, the CEO of AFME, Adam Farkas, has indicated that this data tape would serve to solve the "problem of the current fragmentation of liquidity in the EU" and would provide a scenario in which "all users of the capitals have a complete vision".
Farkas has also called for ensuring sufficient commercial mechanisms to attract investment, both from outside Europe and from within. "Once again, the geographical fragmentation of the EU's stock markets and the complexity of its regulatory framework may prevent the bloc from making policy decisions that benefit the Union as a whole."
"It is critical that co-legislators continue to recognize the important role that banks' systematic insourcing plays in the liquidity ecosystem," Farkas continues.
In this sense, according to AFME data, systematic internalisers (SIs) contribute an additional three trillion euros, which is 14% of total liquidity.
"This is because they put their capital at risk to allow trades to take place that otherwise could not take place. This is very different from exchanges, which bring together buyers and sellers, but do not facilitate trading through its balance", explains the CEO of the association, who considers that both types of negotiation mechanisms have a "key" role in the creation of a dynamic market.
