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Rebecca Hansford
AFME welcomes Commission legislative proposal on CRR but more is needed
28 Apr 2020
In response to the Commission’s proposal today to make targeted amendments to the Capital Requirements Regulation (CRR) to provide temporary relief to banks in the context of the Covid-19 crisis, Michael Lever, Head of Prudential Regulation at AFME, said: “The banking industry has a key role to play alongside and in partnership with governments in helping to mitigate the negative economic consequences arising from Covid-19. It is therefore essential that banks are equipped to fulfil this role so that funding quickly gets where it is needed and markets continue to function without major disruption. “We strongly support the measures contained in today’s fast-track proposal, which should help towards achieving this goal and should be concluded as rapidly as possible. However, more needs to be done to mitigate the impact of Covid-19 on businesses and the economy. “In particular, some assessments of the capacity that has been freed up may be overestimated because they do not consider the reality of market pressures, or the full range of prudential constraints banks have to respect. It is therefore important that co-legislators now consider further targeted and time limited changes to the framework. These are likely to be needed to assist borrowers, markets and the economy. In particular, full capital relief for Covid-related state guarantees must be provided across all metrics of the framework and further, strictly temporary, exclusions from the leverage ratio exposure measure may well be necessary. “Co-legislators should also not forget the impact of the additional bank lending on MREL requirements. Finally, small changes to market risk regulations are needed to ensure EU supervisors have the flexibility allowed under the current Basel Agreement. “Many of these proposed changes have already been adopted by other jurisdictions in recognition of the benefits that they bring through enhancing the capacity of their banks to support their customers and market functioning through this crisis. Europe should not delay in following suit.” -ENDS-
Rebecca Hansford
AFME data finds Europe’s capital markets have performed well despite market stress from COVID-19
21 Apr 2020
AFME has today published new research on the initial impact of COVID-19 on Europe’s capital markets. The report analyses the recent trends during the current abnormal market circumstances. Julio Suarez, Director of Research at AFME, said: “Overall, while prices and spreads have shifted considerably, European capital markets have continued to operate well following the outbreak of COVID-19, with liquidity ranging from very good to mixed, depending on the sector. In fact, there have been record volumes of new issuance in certain sectors. Our data also shows that banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure.” Key findings: Issuance of investment grade corporate bonds surpassed EUR 50bn in the first week of April; this amount was also the highest weekly amount ever issued in Europe. French companies have been particularly active in this respect. This is remarkable, given that many, if not most, financial market participants are working remotely. Non-financial corporates have also rapidly increased secondary equity offerings in an effort to raise cash buffers and withstand business closure for several weeks. Markets are more volatile than a few months ago, which has made it costly for some companies to list through IPOs. IPO issuance on European exchanges has declined 83% compared to a year ago. Markets have been playing their role in providing liquidity and price formation, contributing to capital allocation and helping investors manage their portfolios. Equity trading has surged 94% year on year in March-20, corporate bond trading increased 31% year on year, and FX trading rose 61% year on year in March-20. The rapid increase in securities trading and post-trade activity has been carried out without any major disruption from a business continuity perspective. Securitisation secondary markets have suffered disproportionate reductions in liquidity due to central bank support which is more limited in scope and slower and more difficult to access than for other fixed income sectors. Banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure. The report also summarises AFME’s approach to COVID-19 and the areas AFME have been focusing on to ensure that markets remain well-functioning and liquid in light of the recent impact of the coronavirus. -ENDS-
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”.

Rebecca Hansford

Head of Media Relations

+44 (0)20 3828 2693