Asset Servicing Industry News | Industrial asset managers ask the European Commission to introduce TC for European markets

Industrial asset managers ask the European Commission to introduce TC for European markets

The European Funds and Asset Management Association (EFAMA), together with a number of its members, have written an open letter to the European Commission to encourage the introduction of a standard consolidated band (CT) on the European market.

The introduction in Europe of CT, a high-speed electronic system that reports the latest price and volume data on sales of listed shares, is currently being debated by the European Council and Parliament.

The 17 asset managers who wrote the letter call for the introduction of a TC in European markets “for the continued growth and smooth functioning of [the] Capital Markets Union.

They argue that the European Commission’s current proposals, which include mandatory contribution, a single consolidator model, voluntary consumption and TCs for multiple asset classes, including bonds and equities, do not go far enough to meet the current needs of the European market.

In the letter, they pointed out, “There is a strong case for a TC on stocks, bonds and exchange-traded products (ETPs) data, not just for fund managers who need the data to make informed trading decisions and observe best execution on behalf of their clients.

“Equity and ETP data should ideally be provided in real-time, while bond data can be provided up-to-the-minute to accommodate a different market structure subject to release delays.”

EFAMA and the asset managers involved point out that the logistics necessitated by the COVID-19 pandemic “have accentuated the need for tape, both to provide critical data for liquidity risk management, and also as critical infrastructure to enable continuity of transactions in the event of an exchange failure”.

They added: “Beyond the usual band functionality, there is also an important competitive element to consider. The one we face on a daily basis. Global investors will invest in securities from other jurisdictions (primarily the United States) before bringing investment flows into Europe, due to a lack of consolidated price and volume data for the European market.

“Similarly, CT data can also influence the behavior of retail investors. Here again, post-COVID, we have seen increased retail investor participation and interest in equity markets. This budding interest needs to be nurtured, and investor confidence and the ability to receive best execution needs to be enhanced through the existence of a TC. This positions CT as a natural cornerstone of the European Commission’s retail investment strategy, aimed at empowering retail investors and encouraging their participation in capital markets.

They conclude: “The raison d’être of the band is to support the functioning of the capital market in the EU and thus improve the results of issuers and investors. It should not be designed to subsidize the operating models of intermediaries such as major stock exchanges.

“Indeed, we view the proposed operating model as a subsidy for exchanges and not as a replacement for lost actual data revenue. Currently, the proposal is moving in the opposite direction, compounding an existing problem with market. “

Of the 17 asset managers who wrote the letter, only five wanted to be named publicly, including: Eric Boess, Global Head of Trading at Allianz Global Investors GmbH, Fiona Bassett, Global Head of Systematic Investment Solutions at DWS, and Steve Ellis, global chief information officer for fixed income at Fidelity International.

The other signatories named were Paul Squires, head of Europe, Middle East and Africa at Invesco and Brian Mitchell, global head of equities and fixed income and enforcement at M&G.

Aurora J. William