ESMA calls experts to help prepare guidance on post-trading following recent events

Rick Steves

ESMA calls to renew its working group for post-trading guidance come as an opportunity to make long-overdue policy changes on the whole market infrastructure and clean up the weeds that poison its credibility as we witness the democratization of trading.

The European Securities and Markets Authority (ESMA) has called for candidates to renew the Consultative Working Group (CWG) for the ESMA’s Post Trading Standing Committee (PTSC). The financial watchdog invites interested experts to send their applications to ESMA by 8 March 2021.

The consultative group provides technical assistance and advice to the post-trading committee, particularly in the development of technical standards and compliance. The PTSC focuses on clearing and risk mitigation requirements for financial and non-financial counterparties entering into OTC derivative contracts as well as the related post-trading services. Settlement and requirements applying to CSDs as financial market infrastructures are other key issues under the committee’s authority.

Once technical assistance is provided by the consultative working group, the post-trading committee will prepare ESMA’s technical advice, technical standards, reports, opinions, guidelines, Q&As, and other guidance related to the implementation of post-trading legislations, particularly the Central Securities Depositories Regulation (CSDR) and the European Market Infrastructure Regulation (EMIR).

Given the recent events, regulators ought to act quickly as Reddit groups such as r/WallStreetBets may very well become the norm in retail trading. For years, regulators have stood idle while the praxis within most retail brokers is a classic case of conflict of interest. B-booking positions a vendor in direct competition with its own clients, to say the least. FinanceFeeds has gone into huge detail about this matter for many years.

Clearinghouses play a key role in the b-booking business model and, in situations of extreme volatility like the one we saw last week, clearing entities share some responsibility before investors as they force retail brokers to deposit huge amounts of cash to cover added risks or restrict trading. This was the case with Robinhood as the National Securities Clearing Corporation (NSCC) demanded over a $3 billion demand for cash and only lowered the collateral requirements to $700 million after marking the GameStop stocks as positioning closing only.

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