European share trading is much higher than believed, says report

Rick Steves

“Regulators in the EU and UK need to take the opportunity presented by the imminent establishment of a Consolidated Tape for shares and ETFs to update relevant post-trade transparency rules, so that they capture the full scope of share trading activity in Europe. Without this, Europe risks being left behind.”

An unreported segment relating to hedging activity concerning bilateral synthetic equity exposures traded at-scale on broker-internal systematic internalizers is behind what FIA calls “a longstanding liquidity crisis” in European equity markets.

A new paper published by FIA European Principal Traders Association identified an entire segment of equity activity in both EU and UK markets that is currently unreported.

FIA calls for changes to the MiFID II post-trade transparency regime

Because of the unreported activity, European share trading volumes are perceived by the market as being significantly lower than they actually are.

The reported average daily volume in Europe has been stagnating, particularly relative to the US. This perception has been blamed for declining capital allocation towards European markets and the migration of listings to other regions.

According to FIA, simple technical changes to the MiFID II post-trade transparency regime would bring this activity to light, boosting reported European equity volumes so that they better reflect the actual levels of addressable liquidity and economic interest available in European markets today.

Europe risks being left behind

Piebe Teeboom, Secretary General at FIA EPTA, commented: “A perception of larger, more vibrant secondary markets in Europe will contribute to strengthening EU and UK primary markets, as market depth and liquidity are key factors for companies considering listing their stock via an initial public offering. If the real story regarding European equity volumes was clear for all to see, this would present a much more appealing market environment for those seeking to invest and raise capital, supporting economic growth for the entire region.”

Lara Shevchenko, Senior Policy Advisor – Market Structure at FIA EPTA, said: “Keeping these volumes out of sight unnecessarily complicates achieving the goal of a deeper and more liquid European market. Regulators in the EU and UK need to take the opportunity presented by the imminent establishment of a Consolidated Tape for shares and ETFs to update relevant post-trade transparency rules, so that they capture the full scope of share trading activity in Europe. Without this, Europe risks being left behind.”

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