About a-team Marketing Services

A-Team Insight Blogs

New FIA EPTA Study Reveals Unreported Liquidity in EU and UK Equity Markets

Subscribe to our newsletter

A recent study by the FIA European Principal Traders Association (FIA EPTA), ‘Mind the Transparency Gap,’ has highlighted a significant underreporting of equity trading volumes in both the EU and UK markets, which has led to misconceptions about the actual market liquidity available in these regions.

According to the report, a large volume of equity trades linked to hedging activities on bilateral synthetic equity exposures, which are processed through broker-internal systematic internalisers, remains unreported. This oversight has contributed to the perception of a liquidity crisis within European equity markets, causing concerns over stagnant average daily volumes especially when compared to the US market.

FIA EPTA contends that this perceived shortfall in liquidity has had several negative repercussions, including a decrease in capital allocation to European markets and the relocation of listings to more favourable markets abroad. The paper argues that the volume of this unreported segment is substantial enough to meaningfully address the perceived liquidity issues in Europe.

FIA EPTA Secretary General Piebe Teeboom 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.”

The study also suggests that minor technical adjustments to the MiFID II post-trade transparency requirements could rectify this issue. Implementing these changes would not only reveal the true extent of market liquidity but also potentially stabilise the investment and regulatory environment in European equity markets. Such transparency is expected to attract more global investors and issuers back to European markets, enhancing overall market robustness.

“Keeping these volumes out of sight unnecessarily complicates achieving the goal of a deeper and more liquid European market,” said Lara Shevchenko, Senior Policy Advisor – Market Structure at FIA EPTA.?“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.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Best practice approaches to trade surveillance for market abuse

Breaches of market abuse regulation can lead to reputational damage, eye-watering fines and, ultimately, custodial sentences of up to 10 years. Internally, market abuse triggers scrutiny of traders and trading behaviours; externally it can undermine confidence in markets and cause financial instability. This webinar will discuss market abuse of different types, such as insider trading...

BLOG

A-Team Group Announces Winners of TradingTech Insight Awards USA 2024

A-Team Group has announced the winners of its TradingTech Insight Awards USA 2024. These awards recognise excellence in trading solutions, services and consultancy for capital markets, and focus on vendors providing exceptional trading infrastructure, trading technology, and data solutions. The awards were presented during a celebratory drinks reception after the close of A-Team Group’s TradingTech...

EVENT

Buy AND Build: The Future of Capital Markets Technology, London

Buy AND Build: The Future of Capital Markets Technology London on September 19th at Marriott Hotel Canary Wharf London examines the latest changes and innovations in trading technology and explores how technology is being deployed to create an edge in sell side and buy side capital markets financial institutions.

GUIDE

Regulatory Reporting Handbook – First Edition

Welcome to the inaugural edition of A-Team Group’s Regulatory Reporting Handbook, a comprehensive guide to reporting obligations that must be fulfilled by financial institutions on a global basis. The handbook reviews not only the current state of play within the regulatory reporting space, but also looks ahead to identify how institutions should be preparing for...