The publication of the European Securities Market Authority’s (ESMA) Annual Statistics Report (ASR) for 2020 and its exclusion of UK trading data has caused a furore in securities and exchange circles.
ESMA said that the two reports, which were based on data submitted under the European Markets and Infrastructure Regulation (EMIR) and MIFiD, provide an overview of European Union and European Economic Area (EEA) markets in 2020.
It noted that this was the first comprehensive view of the European Union derivatives and securities markets after Brexit.
It found that the withdrawal had a significant impact. The aggregate size of total traded volumes in the EEA was €9 trillion for equity markets and €18 trillion for bond markets, around one-fifth of the respective €27 trillion and €101 trillion reported for 2019 when the UK was still in the EU fold.
However, the Federation of European Securities Exchanges (FESE) argues that that the UK did not leave the EU until 1 January 2021 and accounted for 70% of turnover in EEA equity last year.
As Rainer Riess, director general of FESE puts it, “It is highly concerning that ESMA has ignored the reality of the UK’s status in 2020. This isn’t a mere technical disagreement, either – this decision will have a serious impact on the policy debate.”
He added, “It is critical for ESMA to monitor the trading of EEA instruments outside of the Union on a continuous basis and whether the share trading obligation is being adhered to going forward.”
The Association for Financial Markets in Europe (AFME) also believes ESMA data was misleading. The trade group said that “the annual report does not yet provide a clear and accurate understanding of where to find liquidity in EU equity markets. It also does not provide a basis upon which future policy decisions can be built. “
Rick Watson, head of capital markets at AFME, said “ESMA has acknowledged that data currently at its disposal does not allow for a clear picture of existing market structure to be drawn and is seeking to address this via a review the of regulatory reporting framework for equity trading/”
He added, “In the absence of accurate consolidated data on the EU trading landscape for equities, AFME publishes its own quarterly analysis of share trading according to execution mechanism.
This analysis uses data flags and identifiers to provide a more refined and, in our view, accurate representation of addressable market liquidity across Europe, including the EU27, the UK and Switzerland.
Our data shows that on-venue trading for Q3 2021 represented 82% of overall trading activity, while trading on SI and OTC represented 10% and 8% respectively.”
©Markets Media Europe 2021