The FIX Trading Community has put forward a series of proposals aimed at enhancing the transparency and appeal of European capital markets. In a whitepaper titled “FIXing Europe – How the European Consolidated Tape can radically improve the image of European capital markets,” the industry association outlines four key reforms to address long-standing issues with trade reporting and data quality.
The proposals are designed to coincide with the introduction of the European consolidated tape (CT), a key regulatory initiative. FIX Executive Director Jim Kaye stated that the introduction of the CT is the “perfect moment to fix a number of major issues once and for all and allow the EU market to show off its full potential for the first time.”One of the primary problems the proposals seek to solve is the undervaluing of European market volumes.
“Today, investors assessing the European market will completely discount up to one-third of volume because of the way trades are reported,” said Kaye. He explained that “activity taking place off-venue, for example in systematic internalisers, is discounted, whereas in the US is it counted and accounts for almost half of the entire market.”
To address this and other issues, FIX has proposed a suite of “practical, targeted reforms” that are designed to be cost-effective and technically feasible for firms to implement. The four key reforms are:
- Suppressing duplicative and non-informational reports, including non-price forming trades related to clearing and settlement.
- Introducing a Closing Auction flag to clearly identify trades executed in closing auctions.
- Ensuring transparency of the execution methods for individual trades.
- Clarifying reporting obligations to remove ambiguity and overlaps.
The FIX Trading Community asserts that these reforms, backed by international precedent, will close data gaps, improve data quality, and ultimately boost the appeal of European markets to investors. The whitepaper also recommends that the proposed reforms be made regulatory to ensure consistent application across all market participants.
The work on these proposals has been a long-term effort by the FIX Global Technical Committee and the European CT working groups.
“FIX has been working for years with participants from all segments of the market on the issues that face European markets,” Kaye commented. The ultimate goal is to create a more efficient and transparent market that benefits all participants in the investment chain.
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