-The French Banking Federation (FBF) calls for a regulatory framework for European markets that fosters orderly competition while protecting investors and enabling companies to raise financing.
The FBF's precisely worded proposals emphasise two basic principles:
the same rules must apply to identical functions,
ensuring pre- and post-trade transparency of the order execution systems and access to these systems will guarantee healthy competition that will benefit investors and issuers.
The FBF acknowledges that European harmonisation must allow for the evolution of equity order execution systems – alternative trading systems (ATSs) and order internalising mechanisms – even though such systems are not yet widely developed in most EU member states. Operating alongside regulated markets, the new systems can deliver innovation and reduce costs for market participants. In the FBF's view, a market's efficiency hinges on competition and on freedom of choice for investors and issuers.
It is therefore vital that, regardless of the market model (order-driven or quote-driven), the Commission's regulatory process should establish a framework that:
ensures fair competition among these systems,
protects investors by means of transparency obligations,
safeguards liquidity and the price formation process, which are key to enabling companies to raise funds in the financial markets.
Order-driven markets fully meet those requirements, knowing that they have long incorporated market making facilities for large ('block') trades.
On the basis of the above principles, to which it is committed, the FBF asks that the European Commission include the following rules in the new ISD :
regulated markets must remain a specific category because they offer superior guarantees for investor protection ; they must therefore benefit from a presumption of 'best execution',
multilateral ATSs must comply with rules comparable to those of regulated markets as regards trading activities (access, transparency, order execution priority, conflicts of interest prevention, etc.),
order internalising systems must be confined to retail orders, which must be executed at the price recorded simultaneously on the regulated market. In this way, clients will benefit both from the best price and from cost savings generated by automatic straight-through processing (execution, clearing and settlement),
the client's prior consent must be obtained before an order is executed outside a regulated market.
In addition to this architecture, the Commission must also define an operational rule for 'best execution' that affords protection and is adapted to each investor category.
FBF response on ISD
Principal definitions (French version)
Calendar (French version)
© FBF - French Banking Federation
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