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Rebecca Hansford
AFME publishes recommendations for partial settlement under CSDR
5 Mar 2020
The Association for Financial Markets in Europe (AFME) has today published recommendations for partial settlement in view of the impending Central Securities Depository Regulation (CSDR). The recommendations aim to encourage greater and more harmonised use of partial settlement across the industry as a way of improving settlement rates. This is against the backdrop of CSDR, which is due to come into force in September 2020* and will introduce penalties for trades that fail to settle. Therefore, any measures to improve settlement rates will help to lessen these negative impacts to firms of CSDR. Stephen Burton, Managing Director, Post Trade at AFME, said: “The increased adoption of partial settlement is one example of how the industry can improve settlement efficiency. Particularly, at a time when the mandatory buy-in regime under CSDR is due to be implemented later this year, improving settlement rates will help to mitigate the possible negative impacts, including reduced liquidity and greater volatility, when investing in European securities.” The market practice document is aimed at all market participants including buy-side clients, brokers and service providers such as intermediaries, central counterparties, custodians, banks and local agents. The set of recommendations fall under the following three areas: Partial Hold and Release Auto-Partial Settlement Manual Partials ​The full recommendations can be downloaded here. -ENDS- Notes to Editors *Correct as of time of publication, however a draft Delegated Act is under consideration by the European Commission to delay to February 1st, 2021
Joint Statement: Reasonable Market Data Costs Benefits the Real Economy
10 Feb 2020
The fundamental function of a trading venue is to match buyers and sellers of securities at a price that balances supply and demand through transparent rules and processes. The sale of market data is a related but separate by-product of that primary function. Over the last few decades trading venues and in particular, incumbent exchanges have greatly evolved in response to market forces and technological and regulatory deve​lopments. The privatization of exchanges and market participants’ implementation of best execution or fiduciary duty obligations has given exchanges significant market power with respect to market data that is unique to their trading venue. Globally, exchanges utilize their market power with the consequence of limiting market data access, data distribution and competition. The negative effects of increased market data costs are widely recognized, including by supervisory authorities. ** Despite some attempts to solve the problems, market data costs have continued to increase. Increasing market data costs have forced many data users to scale back their data purchase to a minimum, and sometimes economically sub-optimal, level, deselecting certain types of securities or markets – especially smaller companies and smaller, foreign markets. Both in the EU and globally, this results in reduced transparency, decreased levels of cross-border competition, lower market integration, less informed markets, higher costs for investors and potential higher cost of capital. In short, the high market data costs distort the development of efficient capital markets, which harms companies and investors and ultimately the real economy. In view of the above, we recommend that: • the MiFIDII and MiFIR requirements and the relevant delegated regulations are properly enforced, and the necessary framework is put in place to enable enforcement.*** • pricing lists published by trading venues become easily comparable. We propose that the fee schedules provided by the trading venues are harmonized and simplified. • market data agreements are drastically simplified and are valid long enough (at least one year) in order for data users to avoid having to deploy unnecessary resources. • audit procedures are simplified and harmonized. • high level definitions (information/market data, derived data/other original created work, display use/ non-display use, etc.) are harmonized. • the role of data vendors should be given a higher level of regulatory attention. • principles on the pricing of market data costs****, definitions and policies should be developed at a global level, preferably by IOSCO • additional steps be taken in case the above measures do not prove sufficient within a reasonable period of time. Concurrently, it should be assessed whether competition authorities rather than financial supervisory authorities would be better suited for ensuring that market data is charged on “reasonable commercial basis”.
AFME and IA: Traders call time on long hours culture
30 Jan 2020
Traders in the investment management and banking industries have today formally called for market trading hours to be reduced by 90-minutes to seven hours. Responding to the London Stock Exchange’s (LSE) consultation on the issue, the Association for Financial Markets in Europe (AFME) and the Investment Association (IA) are continuing their campaign for a reduction in market trading hours to either 09:00-16:00 or 09:30-16:30 GMT (10.00-17.00 or 10.30-17.30 CET). A reduction of 90 minutes in European markets would create more efficient markets, benefiting savers and investors. In Europe, there is currently a significant drive to trade in the last 2.5 hours of the day with trades costing up to 3 times more in the last 30 minutes of the day (when liquidity levels are higher) than in the first 30 minutes of the day. A shorter trading day will mean trades will be more evenly distributed, creating more effective markets and reducing costs for investors. For comparison, the US market has shorter trading hours, but 6 times the turnover, with an overall much lower cost of trading across the day, demonstrating greater stability in liquidity conditions across the whole trading day. AFME and the IA would also support a 12-month pilot across all major European exchanges and trading venues in order to test market structure benefits and impacts. April Day, Managing Director, Head of Equities at AFME, said: “This consultation is a hugely positive step forward in the debate on market trading hours. We hope that the responses from the market will provide useful feedback, particularly for other exchanges in Europe currently reviewing whether to consult their own members. For a change to happen, there has to be coordination between the exchanges across Europe. “We believe that a shorter trading day will improve liquidity in Europe as, rather than being thinly spread over an extended period of time, trades will be more evenly distributed over a shorter trading day. This will create more effective markets, reducing trading costs for market participants and investors. Adjusting market hours is also a first step towards further improving culture and diversity in our industry.” Galina Dimitrova, Director of Capital Markets at the IA, said: “It’s high time we end the long hours culture, which is detrimental to diversity and mental health, and inefficient for the markets. The London Stock Exchange now has the opportunity to lead the way. We will be looking for exchanges across Europe to follow suit and engage with their members to explore next steps, as the case for shorter market hours is clear.” The current long hours culture impacts on traders’ mental health and wellbeing. It has also been identified as a key obstacle in recruiting and retaining more diverse talent. It is hoped the proposed shortened day could also have an impact on workplace culture by improving work-life balance, and providing a necessary step towards creating more diverse and inclusive trading floors. A number of other organisations, concerned about the impact on diversity and mental health, have rallied behind the proposed cut in trading hours: Rachel Suff, well-being adviser for the CIPD, the professional body for HR and people development, said: “It’s really positive to see organisations coming together to challenge the ’norms’ of working practices and the impact they have on people and productivity. Even a small shift in working hours stands to have a positive impact on employee well-being, particularly for those who are trying to juggle working and family life.” Faye McGuinness, Head of Workplace Wellbeing Programmes at Mind, said: “We welcome the reduction in working hours for the financial sector, which we hope will give employees an extra 90 minutes per day to focus on their lives outside work. Commonly cited causes of stress and poor mental health at work include long working hours, excessive workload and poor relationships with managers or other co-workers. “Reducing contracted hours is a step in the right direction, but there’s more to be done. We want every employer to create a culture where staff can speak openly about, and receive support for, their mental health if they need it. Increasingly, employers are recognising the need to offer greater flexibility with their hours, generous annual leave and regular catch up with managers. Even relatively small things, like free fruit and subsidised exercise classes, can have a real benefit. Employers can access resources to help promote wellbeing through the Mental Health at Work Commitment.” Louisa Symington-Mills, Founder and CEO of Cityparents Ltd, the home of professional networks for City workers and inclusive workplaces, comments: “Our members tell us that the long working days which are typical of City businesses have a negative impact on mental wellbeing and work life balance, especially when coupled with the demands of family life. With dual career couples increasingly common, home responsibilities are more equally shared between parents and the traditional working day often jars with family needs. We are supportive of a reduction of trading hours, which would accelerate progress in the adjustment of City working cultures to modern life and we look forward to the outcome of the consultation.” To read the full response, please click here
AFME and Linklaters publish report on financial services conduct supervision
16 Jan 2020
The Association for Financial Markets in Europe (AFME) and Linklaters, in collaboration with Irish law firm Arthur Cox, have published ‘Financial services conduct supervision: What to expect in four key EU jurisdictions.’ The report articulates the approach to conduct supervision taken by financial regulators in France, Germany, Ireland and the Netherlands. Nik Kiri, Financial Regulatory Group partner at Linklaters, commented: “Brexit means that global financial services firms need to forge new regulator relationships or deepen existing ones. Despite standardisation from EU law, national regulators still retain their own priorities and expectations. This report will assist firms navigating new ways of interacting with regulators, establish expectations and improve their understanding of the additional layer of scrutiny.” Richard Middleton, Managing Director, Head of Policy at AFME, said: “The consistent themes defining conduct supervision in Europe are the fair treatment of customers and the proper functioning of financial markets. These themes shape the overall purpose and priorities of the conduct regulators. The specific priorities at national level are determined by the structures, risks and behaviours of the markets. Our report aims to help Compliance teams meet the expectations of conduct regulators, and highlights current priorities such as AML, market misconduct, MiFID 2 and sustainability.” Key issues for 2020: Focusing on conduct supervision rather than prudential supervision (particularly where one regulator supervises both) and on supervision by national competent authorities rather than the ECB, the report clarifies: who the financial services conduct supervisor is; how they supervise; the current priorities; and specific approaches taken to the supervision of key activities. The report can be downloaded from the AFME and Linklaters’ websites. -ENDS-
AFME recommends further improvements to the EU equivalence framework
14 Jan 2020
AFME has today published a paper assessing the EU equivalence framework for financial services and providing recommendations to further enhance its functioning. The paper considers last year’s European Commission Communication and recent developments in the EU equivalence framework. The EU’s equivalence system is one of the most widely used cross-border regimes for financial services and plays an important role by effectively regulating market access and international relationships. In the paper, AFME proposes key objectives for the EU’s relationship with third countries and core principles which should underpin equivalence. It also makes a number of recommendations to further improve the functioning of the regime and strengthen relationships with third countries to ensure continued connectivity with international financial markets while effectively managing risks to financial stability, market integrity and investor protection. The paper addresses the EU’s relationship with third countries generally as opposed to the specific future relationship with the UK post Brexit. Oliver Moullin, Managing Director at AFME, said: “It is important to ensure continued close connectivity between the EU and international capital markets. Relationships with third countries should be further strengthened including through improving the transparency and certainty of the equivalence process and further enhancing regulatory and supervisory cooperation with third country authorities. “This will support continued connectivity with international financial markets, minimise unnecessary fragmentation and maximise benefits for consumers of financial services across Europe. It will also allow the EU to effectively manage risks to financial stability, market integrity and investor protection.” The paper advocates that for EU capital markets to thrive, alongside developing the EU financial ecosystem, it is important to maintain and continue to develop open capital markets that are able to provide investors and businesses with access to international capital, investment and funding opportunities while preserving market integrity and fairness of competition between EU firms and third country entities. AFME believes that the following objectives should underpin the EU’s relationships with third countries with respect to financial services: promoting open, competitive capital markets and minimising barriers to cross-border business, and maintaining market integrity, financial stability, fair competition and investor protection in the EU; preserving choice for investors; creating a stable and transparent framework to provide certainty; and developing arrangements for close supervisory and regulatory cooperation. AFME proposes four key principles which should be considered in the context of equivalence determinations: decisions should be proportionate and risk-sensitive, based on sound regulatory and supervisory arrangements; the equivalence assessment should be focused on alignment of regulatory and supervisory outcomes in the area under consideration; there should be transparency in the decision-making process; and decisions should be made in a timely manner and provide certainty and stability for market participants. The paper can be downloaded from the AFME website. -ENDS-
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Rebecca Hansford

Head of Media Relations

+44 (0)20 3828 2693