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AFME recommends co-legislators focus on original objectives of EU Green Bond Standard
27 Jun 2022
In light of the ongoing interinstitutional negotiations (trilogues) on the EU Green Bond Standard (EU GBS) proposal, the Association for Financial Markets in Europe (AFME) has today published a paper highlighting 6 priorities to fulfil the objectives of the EU GBS framework and to support the establishment of an effective and successful market for EU Green Bonds. Oliver Moullin, Managing Director for Sustainable Finance at AFME, said: “The EU GBS has the potential to play an important role in stimulating the issuance of green bonds in the EU amid challenging market conditions. Delivering on the proposal should therefore be a priority for the upcoming Presidency of the Council. We recommend that co-legislators keep the discussions focused on delivering a product-based, voluntary gold-standard for green bonds that is attractive to both issuers and investors.” The French Presidency of the European Council commenced the final phase of negotiations in June and talks will continue over the second half of the year under the auspices of the Czech presidency. Among the key issues for discussion are the scope of the regulation and additional entity-level requirements. This comes after the Parliament proposed introducing requirements for all issuers of sustainable bonds in the EU and to add entity-level disclosure requirements. Moullin continued: “The Parliament’s report substantially extends the coverage of the label, which would capture all bonds marketed in the EU as environmentally sustainable. This new approach is a meaningful shift from the original objectives of the proposal. We are concerned that it would adversely impact the EU green and sustainable bonds market and therefore undermine the progress in developing sustainable finance in the EU. We therefore strongly recommend that co-legislators maintain a product-based approach to deliver on the EU GBS objectives.” To support the ongoing negotiations, AFME’s paper highlights the following six priorities: 1. Focus on criteria to use the EU Green Bond designation without threatening the continued growth of the market for sustainable bonds. 2. Maintain the Standard’s voluntary nature and its strong link with the EU Taxonomy Regulation. 3. Develop a product-based framework, avoiding complex disclosure requirements at the issuer level. 4. Ensure that eligible bonds maintain their designation until maturity, after changes to the Taxonomy criteria. 5. Ensure the standard works for securitisation and supports the development of green securitisations. 6. Ensure sufficient time for each periodic review of the legislation, and maintain its voluntary nature. – Ends –
Rebecca Hansford
AFME comments on CRR3 draft report
31 May 2022
The Association for Financial Markets in Europe (AFME) welcomes today’s publication of the draft report by Rapporteur Jonas Fernandez, which represents an important milestone in the legislative negotiations on the banking package which was published by the European Commission last October in order to implement the final 2017 Basel III rules. Caroline Liesegang, Head of Prudential Regulation at AFME, said: “European banks have raised hundreds of billions in equity capital since the financial crisis,and their resilience has been proven during recent economic shocks. The co-legislators should therefore uphold their commitment to avoid any significant further increases in capital requirements, which could have negative consequences for lending and the broader economic recovery. While the Commission proposals include some transitional measures to allow the market to adjust, AFME’s impact analysis suggests that capital increases could still be material and the legislative texts need to be reviewed with care.” In particular, as the Parliament continues its examination of the proposals, AFME recommends that it considers targeted adjustments in a number of areas. These include allowing flexibility on the duration of the above-mentioned transitional measures and avoiding a disproportionate impact on end-users’ ability to access a broad range of important services like trade finance, hedging and trading. It is important that certain aspects of the package, in particular those which are most relevant for capital market businesses and global in nature are implemented simultaneously and consistently across jurisdictions. In this context, we encourage the Parliament to support the delegation of powers to the European Commission as the most efficient tool for ensuring international alignment. Finally, we welcome the rapporteur’s initial support for the application of the Output Floor at the consolidated level. This is important to avoid undue capital impacts and fragmentation in Europe, and we call on the Parliament to uphold this approach in the course of their work to finalise the package.
AFME & Paris EUROPLACE call for action to ensure Securitisation can support the economic recovery and green and digital transitions
31 May 2022
Following a High-Level Forum organised by the Association for Financial Markets in Europe (AFME) and Paris EUROPLACE discussing the role that securitisation can play in helping to meet Europe’s financing needs, the two organisations have jointly called for the Commission and co-legislators to step up efforts to finalise the European securitisation framework and make it fit for purpose. This event takes place ahead of a key report due in the autumn from the European Supervisory Authorities (ESAs), which have been tasked with advising the Commission on how the prudential framework has performed relative to its stated purpose and the objective of revising EU securitisation markets. AFME and Paris Europlace urge the ESAs not to miss this opportunity to introduce more proportionality and risk sensitivity in the regulatory framework, so that European savings can be mobilised to finance the European economy. This must include targeted measures to revive the market, including a recalibration of capital charges, and better treatment for issuers and investors. Adam Farkas, Chief Executive at the Association for Financial Markets in Europe (AFME), said: “We are concerned that time is running out in the current legislative cycle to effect the necessary changes to make European securitisation an attractive asset class and to halt the steady decline of EU ABS. Securitisation is being held back by a regulatory framework that was developed in the aftermath of the global financial crisis and is heavily coloured by experiences in the US sub-prime mortgage market and products which no longer exist or have been prohibited by the European regulatory framework. In order for securitisation to reach its true potential in funding the green transition, supporting growth in the digital economy and providing private capital to businesses, an understanding of the crucial role that EU capital markets must play in functioning EU ABS markets is crucial in driving targeted adjustments to EU prudential regulation.” Arnaud de Bresson, Managing Director, Paris Europlace, said: “We need a more efficient and competitive securitisation framework in Europe because it can unlock funding to help support Europe’s economic recovery and its huge financing needs in light of the war in Ukraine and in the post-Covid environment. European authorities should consider securitisation as a high priority in the context of accelerating the implementation of the European Capital Markets Union, and more especially due to the over reliance on bank financing in Europe and the need to develop new financing channels through capital markets. The review of investor needs and attracting investors via the necessary simplification of the rules must be a priority.” Jean Lemierre, Chairman of the Board of Directors at BNP Paribas, said: “As a large European bank, BNP Paribas is highly committed to support the growing financing needs of the European economy. Banks are best placed to originate and analyse the risk of those financings, given their credit risk expertise and local presence. But, given the impact on their capital requirements, they need tools to transfer part of these assets to investors. Securitization could be part of the solution, if existing regulatory hurdles are addressed.” During the Forum, speakers discussed why securitisation is important - to support the financing of the European economy in light of the huge financing needs deriving from the war in Ukraine and in the post-Covid economic recovery, as well as supporting the green and digital transition. Industry insiders referred to the importance of private securitisation through bank lending to enable incumbent corporates to diversify their funding base and for disruptors to scale up their businesses prior to accessing capital markets. They invariably saw securitisation as an effective tool to transition their businesses to contribute to the green economy. Over the course of the day, panellists also discussed the need for targeted regulatory reforms in both EU securitisation regulation and the Prudential Frameworks. - ENDS - AFME Contact Rebecca Hansford Head of Media Relations [email protected] +44 (0)20 3828 2693 +44 (0)7825 081 686 Paris EUROPLACE Contact Arnaud de Bresson, CEO [email protected] +33 6 09 26 18 08 About AFME: AFME (Association for Financial Markets in Europe) advocates for deep and integrated European capital markets which serve the needs of companies and investors, supporting economic growth and benefiting society. AFME is the voice of all Europe’s wholesale financial markets, providing expertise across a broad range of regulatory and capital markets issues. AFME aims to act as a bridge between market participants and policy makers across Europe, drawing on its strong and long-standing relationships, its technical knowledge and fact-based work. Its members comprise pan-EU and global banks as well as key regional banks, brokers, law firms, investors and other financial market participants. AFME participates in a global alliance with the Securities Industry and Financial Markets Association (SIFMA) in the US, and the Asia Securities Industry and Financial Markets Association (ASIFMA) through the GFMA (Global Financial Markets Association). For more information please visit the AFME website: Follow us on Twitter @AFME_EU About Paris EUROPLACE: Paris EUROPLACE is the Paris financial services-led body, in charge of developing and promoting Paris as an international financial center. Paris EUROPLACE is chaired by Augustin de ROMANET, Chairman and CEO, Aéroports de Paris (ADP). Paris EUROPLACE brings together all financial services industry stakeholders and is the voice for its 400+ members, corporate issuers, investors, banks and financial intermediaries, professional associations, attorneys and accountants, consulting firms, etc., as well as the financial market authorities. For more information please visit the Paris EUROPLACE website: Follow us on Twitter @europlace
AFME, BVI, Cboe Europe and EFAMA Agree Cross-Industry Consensus on EU Equity Consolidated Tape
30 May 2022
AFME, BVI, Cboe Europe and EFAMA have today jointly published a position paper which provides a set of key principles needed to ensure the successful creation of an EU Equity Consolidated Tape (CT). These 11 principles, available here, would help ensure a CT is commercially viable and appropriately constructed to deliver the most benefit to European issuers, investors, exchanges and other intermediaries. These organisations believe a successful equities CT will democratise access to equities data, contributing to the creation of a truly pan-European market in line with the goals of the European Commission’s Capital Markets Union project. An appropriately constructed CT would substantially increase the number of market data users with access to pan-EU data, increase the visibility of issuers listed in every EU market and drive the growth of the region’s capital markets. While the group supports many aspects of the European Commission’s blueprint for a CT across European markets, as set out as part of its Markets in Financial Instruments Regulation (MiFIR) review in 2021, AFME, BVI, Cboe Europe and EFAMA believe the EU needs to be more ambitious with its proposals to realise the full benefits of this crucial initiative. Adam Farkas, chief executive of AFME, said: “Until now, the development of a consolidated tape has been a slow burn in the EU. To ensure the EU can compete as a global player, it needs to implement this vital price comparison tool, which will provide investors with a holistic view of investment opportunities across Europe, instead of limiting themselves to their home markets. However, in order for this to be achieved, the tape must be appropriately constructed. This cross-industry paper sets out the key principles for establishing a consolidated tape which can be both commercially viable and of genuine use to EU investors and market participants.” Thomas Richter, CEO of BVI, said: “The consolidated tape supports the Capital Markets Union and transparency for investors as well as issuers. Not only trading but also the public listing of companies would increase, especially on the smaller stock exchanges in the EU. In addition, a CT would improve trading processes and best execution of orders by giving institutional and retail investors direct access to trading activity, liquidity, and prices.” Natan Tiefenbrun, President of Cboe Europe, said: “These principles would help ensure the EU achieves a commercially viable Consolidated Tape, dramatically improving the accessibility of EU market data to investors of all types. It would help achieve an integrated and more resilient EU market and, crucially, encourage greater retail participation in EU equity markets via improved data access and enhanced investor protections.” Tanguy van de Werve, Director General of EFAMA, said: “The signatories to these Principles represent a broad cross-section of capital market participants in Europe. It highlights the importance of delivering a consolidated tape for equities in what is a global trading marketplace. The ability to access a single source of consolidated data is paramount for continuing to attract global investment flows, for enhancing capital market participation in Europe, and for building investor confidence through transparency on trade data.” The cross-industry consensus (initially endorsed by AFME, BVI, Cboe Europe and EFAMA), includes the following principles: Any CT should not serve latency-sensitive users, with the emphasis instead on displayed uses by professional and retail investors. The CT infrastructure does not need to be the most expensive low-latency infrastructure and those firms engaging in latency sensitive activities will, in all likelihood, continue to source their market data via direct feeds. Revenue sharing model should include all contributors. This model should be simple, remunerate all contributors with higher weighting given to pre-trade transparent and multilateral mechanisms versus others, incentivise the provision of pre-trade data and provide certainty of revenues to smaller exchanges. There should be one single CT provider, subject to appropriate governance and regulatory oversight. There should be mandatory contribution of pre-trade and post-trade data, to overcome the complexities and variances of licensing data from multiple sources and ensure the CT is viable business opportunity. Commercial Viability requires real-time, pre-trade data. Based on significant market research, demand for a purely post-trade CT is limited, and most use cases require the inclusion of real-time post-trade data and pre-trade data. Engineering of the CT and its feeds should be simplified. The CT infrastructure should be built to receive pre-trade data from the outset, as this will allow for subsequent flexibility. CT content should be designed to cover the full trading day, and to improve resilience. A CT does not require a change to Best Execution rules. Brokers should continue to be allowed to have discretion about which venues to access when trading for customers. However, ensuring that consumers are well informed about the availability of better prices may, over time, lead to commercial demand for brokers to enhance their access to liquidity The CT should be priced to succeed. The CT needs set pricing that balances maximising the user base with generation of sufficient revenues to fairly compensate all contributors, and with particular emphasis on ensuring a preferential compensation to smaller venues CT should be sold with a simple, single market data licensing framework covering a variety of use cases. This would remove the existing disincentive to access data (and thus to invest) across the EU, which arises from current complexities of managing multiple licenses with differing terms and policies. There should be no mandatory consumption of a CT, given that some firms will source direct feeds due to the need for lower-latency data, and hence would have no need for the CT for this purpose. About AFME AFME represents a broad array of European and global participants in the wholesale financial markets. Its members comprise pan-EU and global banks as well as key regional banks, brokers, law firms, investors and other financial market participants. We advocate stable, competitive, sustainable European financial markets that support economic growth and benefit society. AFME is the European member of the Global Financial Markets Association (GFMA) a global alliance with the Securities Industry and Financial Markets Association (SIFMA) in the US, and the Asia Securities Industry and Financial Markets Association (ASIFMA) in Asia. AFME is registered on the EU Transparency Register, registration number 65110063986-76. About BVI BVI represents the interests of the German fund industry at national and international level. The association promotes sensible regulation of the fund business as well as fair competition vis-à-vis policy makers and regulators. Asset Managers act as trustees in the sole interest of the investor and are subject to strict regulation. Funds match funding investors and the capital demands of companies and governments, thus fulfilling an important macro-economic function. BVI’s 116 members manage assets of some EUR 4 trillion for retail investors, insurance companies, pension and retirement schemes, banks, churches and foundations. With a share of 28%, Germany represents the largest fund market in the EU. BVI’s ID number in the EU Transparency Register is 96816064173-47. For more information, please visit About Cboe Cboe Global Markets (Cboe: CBOE), a leading provider of market infrastructure and tradable products, delivers cutting-edge trading, clearing and investment solutions to market participants around the world. The company is committed to operating a trusted, inclusive global marketplace, providing leading products, technology and data solutions that enable participants to define a sustainable financial future. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives and FX, acrossNorth America,EuropeandAsia Pacific. To learn more, About EFAMA EFAMA is the voice of the European investment management industry, which manages over EUR 30 trillion of assets on behalf of its clients in Europe and around the world. We advocate for a regulatory environment that supports our industry’s crucial role in steering capital towards investments for a sustainable future and providing long-term value for investors. Besides fostering a Capital Markets Union, consumer empowerment and sustainable finance in Europe, we also support open and well-functioning global capital markets and engage with international standard setters and relevant third-country authorities. EFAMA is a primary source of industry statistical data and issues regular publications, including Market Insights and the authoritative EFAMA Fact Book. More information is available at Contacts AFME Rebecca Hansford, Head of Media Relations, Association for Financial Markets in Europe: [email protected] BVI Frank Bock, Head of Communications, BVI: [email protected] Cboe Europe Tim Cave, Head of Marketing and Communications, Cboe Europe: [email protected] EFAMA Susan Yavari, Senior Regulatory Policy Advisor, EFAMA: [email protected]
AFME welcomes EU Parliament’s compromise on EU Green Bonds Standard
16 May 2022
Commenting on the agreement in the European Parliament today on the proposed EU Green Bond Standard (GBS), Oliver Moullin, Managing Director for Sustainable Finance at the Association for Financial Markets in Europe (AFME), said: “Today’s agreement is a welcome step forward towards establishing an important element of the EU sustainable finance framework. On behalf of our members, AFME contributed with practical industry input for the GBS to support and strengthen the EU green bonds market. “Consistently with the objective to establish a “gold standard” in the market, AFME welcomes that the compromise maintains the voluntary nature of the standard, complementing existing market labels and allowing issuers to offer green bonds in line with other international standards to support the continued growth and efficiency of the green bond market. “Looking ahead to the interinstitutional (trilogue) negotiations, in order to support the continued growth of ESG bond markets ­- which is particularly important in current market conditions - the co-legislators should focus on the following as they finalise the standard: Maintaining the focus of creating a voluntary standard for green bonds and not extending requirements to other types of instruments such as other bonds marketed as sustainable; Maintaining the link with the EU Taxonomy Regulation and avoiding duplicative requirements for transition plans; and Ensuring that the standard supports the development of green securitisation.” ENDS - Background The latest AFME ESG Finance Report for Q1 2022 indicates that market conditions have been unfavourable for primary issuance in the first quarter. The global interest rate environment, market volatility, and the ongoing geopolitical tensions have contributed to challenging market conditions. In this context, it is even more important that the EU GBS remains a voluntary standard, complementing existing market labels and allowing issuers to offer green bonds in line with other international standards to support the continued growth and efficiency of the green bond market As trilogues begin, AFME hopes that the co-legislators will avoid creating different rules for sovereign and private issuers, as well divergence from other pieces of EU sustainable finance legislation, including the disclosures requirements under the SFDR and the transition plan reporting under the CSRD. In our previous publications, we noted the importance for Green Bonds to maintain their designation for the entire term to maturity regardless of updated Taxonomy criteria, a necessary condition for issuers and investors to rely on this instrument. AFME also provided recommendations to ensure that the EU GBS supports the growth of EU securitisation markets and applies effectively to securitisation structures. For further information, please see AFME’s previous publications on the EU Green Bond Standard: AFME views on the EU Green Bond Standard (GBS) proposal in the context of the European Parliament and Council negotiations AFME welcomes EBA report suggesting EU Green Bond Standard framework adjustments for securitisation Latest AFME ESG data report for Q1 2022
AFME welcomes agreement on the Digital Operational Resilience Act (DORA)
12 May 2022
Commenting on the announcement from the French Presidency of the Council of the European Union and the European Parliament, outlining a provisional interinstitutional agreement on the Digital Operational Resilience Act (DORA) has been reached, James Kemp, Managing Director at the Association for Financial Markets in Europe (AFME), said: “This is an ambitious legislative proposal to streamline and harmonise the way financial entities and technology providers manage and mitigate technology risks. “In particular, AFME welcomes the emphasis on ensuring a risk-based approach to how financial entities manage ICT risks. This is a positive development that will enable financial entities to implement ICT controls in a manner that is increasingly cost-effective and proportionate to risks, while maintaining alignment with existing European standards and guidelines. “Amid significant technological change and the rapid pace of innovation, the rationale for DORA has become more important than ever for the EU. Despite the fact a provisional agreement has been reached, the completion of DORA will still take a number of years, due to the several Regulatory Technical Standards underpinning the legislation. “For the project to succeed, it will be crucial that DORA takes into account the broad global context of digitisation, ensuring that the EU remains open to global sources of innovation, standards and markets.” Specifically, AFME: welcomes the fact that the provisions under DORA, on how financial entities manage Information and Communication Technologies (ICT) risks, have become more proportionate and risk-based. This is a positive development as it will enable financial entities to implement ICT controls in a manner that is increasingly cost-effective and proportionate to risks (e.g., risk-based). In addition, this approach maintains alignment with existing European regulatory guidelines on ICT risks (e.g., EBA Guidelines on ICT and Security Risk Management and Guidelines on Outsourcing Arrangements), thus increasing regulatory harmonisation in the EU, a key objective of the DORA proposal. stresses that financial entities intragroup providers should be defined and exempted from key DORA provisions, such as the Oversight framework. Financial entities ICT intragroup providers have been differentiated from external providers within the proposal through separate definitions. This will enable financial entities to differentiate ICT risks stemming from intragroup providers versus those stemming from external providers, with controls suited to the risk profile of each. very much welcomes that the initial limitations on the ability of EU financial entities to use thirdcountry based ICT third party providers and sub-outsourcing arrangements, have been reduced under article 28.9. This now allows for providers to establish a ‘subsidiary’ in the Union to ensure enforcement of the Oversight framework under DORA, whilst maintaining EU competitiveness by avoiding the costly localisation of operations and technology. welcomes the limitation to the automatic termination of contracts between financial entities and ICT critical third party service providers. Due to the complexity and risks associated with contract termination, additional text has been incorporated into the proposal to guarantee the safe and secure transition to alternative providers if required. acknowledges that additional time has been provided to financial entities and ICT critical third parties to comply with DORA by extending the implementation window from 12 months to 24 months. - ENDS - Notes to Editors: Background: Following the European Commission’s (EC) legislative proposal for a Digital Operational Resilience Act for the Financial Sector (DORA) on September 24th, 2020, the European Parliament (EP) and the Council have been negotiating their respective amendments in support of the finalisation of the proposal and its forthcoming implementation. Interinstitutional negotiations (known as ‘trialogues’) have been taking place since the beginning of the year with the aim to finalise the legislation before the summer. Overall several key areas of the legislative proposal, throughout the negotiation period, have incorporated amendments that increase alignment with industry considerations in ensuring DORA is fit for purpose and proportionate.
AFME/FINBOURNE study shows need for longer deferrals for large fixed income trades
3 May 2022
Press release available in English, French, German. The Association for Financial Markets in Europe (AFME) has today published a first of its kind study consolidating fixed income trading data from numerous sources for the period of March to December 2021. This shows that the majority of fixed income trades could be made transparent in near real-time, but also finds there is a clear need for a longer deferral period for the publication of larger or illiquid trades. Data provided by FINBOURNE Technology for this study demonstrates that an inadequate deferral calibration - as currently proposed by the European Commission - could have potentially significant negative implications for market liquidity. In 2021, as part of the Markets in Financial Instruments Regulation (MiFIR) review, the Commission set out changes to bond market transparency which included harmonising the deferral regime and shortening post-trade publication delays. The AFME paper analyses recent European fixed income trade data from around 5500 of the most frequently traded securities. The analysis focuses on the corporate bond landscape (rather than government bonds) to identify which types of trades could be subject to near real-time price and volume transparency, and which types of trades should be subject to deferrals. From the data set studied, AFME and Finbourne find that different deferral periods need to be applied based on the trade size and issuance volume, among other characteristics. Applying the Commission’s proposed deferral regime to all trades, especially those larger in size or illiquid, risks exposing liquidity providers to potential undue risks, which could negatively impact the amount of liquidity/pricing that market makers are able to provide. Adam Farkas, Chief Executive of AFME, said: “This report demonstrates both the value of having a high quality, consolidated view of bond trading in the EU and the potentially significant implications of inadequate deferral calibration. Current proposals to reduce the amount of time that post-trading information can be deferred from publication could have a negative impact on liquidity for corporate bonds. This is especially true for large transactions or trades in bonds that are less liquid, as this would force liquidity providers to disclose their books to the market before they have unwound or hedged their positions, resulting in negative outcomes for investors and a direct hit to liquidity provision. In turn, this could impact the availability and pricing of funding for EU corporates in primary debt markets, which is counterintuitive and not in line with the goals of the Capital Markets Union. Even the Commission proposals implicitly recognise that there can be downsides to publishing trade information too quickly because sovereign bonds will benefit from lengthy publication deferral periods. “AFME is therefore calling on the co-legislators to ensure that corporate bonds are not treated less favourably than government bonds and to avoid hardwiring the proposed price and volume deferral calibration into primary legislation. A wider range of deferral periods calibrated to the realities of the fixed income market as demonstrated in this report is needed instead.” Thomas McHugh, CEO and Co-Founder, at FINBOURNE Technology, said: “We are pleased to contribute data analysis to AFME’s study and support the formulation of evidence-based policy. Combining our data management expertise and publicly available MiFID transaction records, we have been able to aggregate over one million transaction records for this study. This includes, linking transactions to ESMA’s FIRDS database, normalising the divergent formats, and scenario-testing at a granular (ISIN by ISIN) level. Our belief is that by making the data fully transparent, we will help the market to address key issues that have hindered the successful development of a consolidated tape to date.” Key findings: Small trades (of less than EUR 500k) account for the majority (c. 70%) of the overall number of trades in the data set and can support being reported in near real-time. Therefore, making these small transactions transparent will significantly improve transparency by almost 10 fold, increasing from 8% of transactions currently being reported real-time to almost 70% of transactions becoming real-time transparent. The smaller the trade size and the more liquid the instrument, the less risk is associated with rapid dissemination of price and volume information for liquidity providers, with the ‘trade out’ (i.e. moving the risk off the bank’s balance sheet) being less than 1 day for liquidity providers. However, this 70% reflects 13% of market volume. Therefore these transactions represent a much smaller percentage of market volume than of the number of trades. Larger transactions (of more than EUR 500k) reflect a relatively small percentage of total transactions, accounting for c. 30% of total transactions but a much larger share of market volume. The data set demonstrates that the larger the transaction, the longer it takes to 'trade out' and clear the market. For trades larger than EUR 1 million, it takes on average 6 business days to ‘trade out’ of positions. For trades over EUR 5 million it takes on average 19 days to trade out, while larger trades take even longer. The deferral regime should have a conceptual link between trade size categories (i.e. real-time transparency), bond liquidity and deferral periods (i.e. for a regime with a higher trade size, or deemed illiquid the deferral period should be longer); Investors who will benefit most from increased transparency are smaller, less sophisticated investors whose trading activity will be concentrated in smaller sized trades. At the same time, longer deferrals for the small number of large transactions should limit the risk of liquidity reduction in the market for institutional investors. AFME therefore opposes a hardwiring of price and volume deferral calibration in primary legislation (as is currently proposed). Since each fixed income asset class will include a significant number of illiquid bonds, AFME urges the co-legislators to adopt a range of deferral periods, going beyond the Commission’s proposal for maximum deferral period for prices (by the end of the day) and volume (within two weeks). ESMA will then be able to calibrate the details of which bonds should go into the various deferral categories, which should be based off detailed and high-quality data. – Ends – Notes to Editors: About market makers in the fixed income market: In markets that are less liquid, such as the fixed income market, market makers play a crucial role in providing liquidity to the market. Market makers facilitate transactions by taking risk on to their balance sheet and provide ‘immediacy’ of execution to their clients, therefore facilitating liquidity in the market. Typically, when a market maker trades, especially in large size or in an illiquid instrument, they take on a position which incurs market risk. If the level of risk increases above an acceptable level, it is likely to negatively impact the amount of liquidity/pricing the market makers are able to provide.
Northern Trust and State Street join AFME Board
17 Mar 2022
The Association for Financial Markets in Europe (AFME) has announced that Northern Trust and State Street have joined the Association as Board members. They join 24 other leading European wholesale banking groups on AFME’s governing body. The individuals representing these Members on the AFME Board are Justin Chapman,Executive Vice President - Global Executive Securities Services and Global Head Market Advocacy & Innovation for Northern Trust and Martine Bond, Executive Vice President and Head of Global Markets Business in EMEA and GlobalLinkX for State Street. Adam Farkas, Chief Executive of AFME, said: “We are delighted to welcome Justin and Martine to the AFME Board. We are very fortunate to welcome two such highly experienced market professionals and the addition of their deep expertise which will provide valuable input, in particular, to the work of our Technology and Operations and Post Trade divisions. We now have 26 leading global and European investment banks driving the decision-making on the AFME Board, further strengthening our voice as the trade body for Europe’s wholesale capital markets.” – Ends – Biographies of the new Board Members: Justin Chapman is the Global Executive in charge of Securities Services at Northern Trust where he is responsible for strategy and profitability. Justin is also the Global Head of the Market Advocacy & Innovation Research organization which coordinates Northern Trust's engagement with key industry associations and regulatory engagements whilst researching and framing new market and technology innovations to drive profitable business growth and operational efficiencies. Martine Bond is Executive Vice President and Head of Global Markets business in EMEA and GlobalLink at State Street, responsible for electronic trading solutions, that help clients maximize efficiency while reducing trading costs for foreign exchange, cash and derivatives.

Rebecca Hansford

Head of Media Relations

[email protected]