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Niki Beattie , chief executive , Market Structure Partners
That didn ’ t happen , which is a relief , because such a model would significantly disadvantage pan-European venues which have delivered lower costs and greater choice for the benefit of end investors .
As discussions stand , both the Council and the Parliament have proposed a revenue sharing model for the equities CT which rewards smaller exchanges first , followed by venues based on the level of pre-trade transparency they offer , and finally favouring venues that also perform a listing function . It is important that smaller exchanges need to remain viable businesses and should be rewarded appropriately from the tape – it is also a great opportunity for them to package their data alongside that of other markets and expand their audience of potential investors . However , beyond this , all market data contributors should be compensated in a fair manner , proportionate to the value to consumers of the data they contribute . It might be legitimate to recognise that data from pre-trade transparent markets is rewarded more highly than non-displayed markets , but there should be no discrimination amongst venues in the same category .
Nick , what are the latest proposals in the context of equity transparency ? We believe the best way to make Europe attractive to investors of all types is to cater to their needs by offering a range of trading mechanisms to facilitate price and size discovery . Our periodic auction service , for example , is around 4,000 times slower than our central limit order book . That attracts a different participant mix , helping less technically sophisticated market participants and institutional investors to avoid negative market impact .
The EC ’ s initial proposal sought to shower incumbent exchanges with concessions in return for their support for a CT . The suggested changes would have almost entirely prohibited midpoint trading in the EU via a minimum order size threshold that would have eliminated more than 95 % of trades in reference price waiver ( RPW ) systems . Given the UK ’ s decision to replace the double volume cap system with a new power for the FCA to intervene if necessary to protect price formation , the EC ’ s proposal risked driving liquidity offshore to venues that , whilst still accessible to international investors and brokers , undermining their access to liquidity and their international competitiveness .
Encouragingly , both the EU Council and EU Parliament have proposed not to proceed with the minimum size threshold for RPW venues . They also suggest postponing or relaxing the volume cap mechanism , whilst reserving the right for European Commission to intervene if there is a demonstrated threat to price formation . European investors benefit greatly from having access to diverse trading mechanisms that solve for different liquidity and market impact sensitivities .
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