The FIX Trading Community, the industry association that manages the world’s trading language, the FIX Protocol, has called on the European Securities and Markets Authority’s (ESMA) to improve significant issues with data reporting that lead to detrimental impacts on overall market health, in its response to last month’s Call for Evidence on European Equities Market Structure consultation. 

Executive Director Jim Kaye said problems with trade identification and reporting mean that the overall size of the European market is impossible to measure accurately, and trend analysis is muddied by data problems and the need to isolate different trading sessions, special trading days and other trading events for comparison purposes.

“The way trades are flagged currently mean investors can’t separate price-forming transactions from duplicate or technical reporting, and so are dramatically under-estimating European market size and liquidity,” he said. “Clarifications to RTS 1 to enable accurate market volume calculations can be enacted quicky and easily, positioning European markets as transparent, efficient, and attractive to global capital.”

FIX’s key recommendations include:-Suppressing non price-forming events by extending post-trade transparency (PTT) exemptions.– Fixing post-Brexit reporting issues that result in duplication of reporting, by recognising the UK RTS 1 PTT as equivalent.– Exempting intra-group risk management transactions from PTT requirements.– Reducing ETF NAV reporting requirements from three to one, aligning with Financial Conduct Authority (FCA) practices to reduce reporting burden and improve data clarity.- Improving capture of closing price activity by expanding benchmark trade definitions to include market closing prices and introducing the CLSE flag, as per FCA practices.– Clarifying regulatory guidelines around a) chains of counterparties and b) off-book cross-border transactions, to eliminate duplicate reporting.

The response also comments extensively on addressable liquidity and the need to factor in the distinct concepts of price formation (trades with real economic interest), and accessibility (availability and suitability of different types of liquidity for different types of clients), taking into account factors such as timing, automation and transaction type. 

“These modifications are essential for European market development and efficiency,” Mr Kaye said. “They align with established practices, we believe will be relatively straightforward to implement, and FIX is ready and willing to assist with technical support.” 

The FIX Trading Community is the custodian of the FIX Protocol – the trading language that underpins global financial markets. An independent, non-profit, global organisation, FIX brings firms together to solve common issues and shape the evolution of financial capital markets. Through more than 40 working groups and committees in over 60 countries, FIX maintains and develops the FIX Protocol and other trading standards; helps shape regulation; and supports the industry across a wide range of global issues including digital assets implementation, AI and automation, liquidity, data quality and trading workflows. FIX’s work is only possible through the support of its members – to find out more visit www.fixtrading.org. 

Source: FIX Trading