It is reassuring to see ESMA supporting the CMU, which if baked properly, it should make it easier for SMEs to access wholesale capital markets. Driving jobs and growth across Europe is clearly the end goal but, in order to achieve it you cannot ignore that growth will be primarily driven by pan European liberalisation of markets rather than an ever closer drive for increased and costly regulation.
In ESMA’s capacity as a pan European regulator charged with investor protection and ensuring market stability, it is natural that their focus should be on regulation. In this respect, we agree with ESMA that empowering it to suspend rules that lack well calibrated guidance or technical specifications is a positive step towards ensuring liquidity in the secondary markets is maintained whilst also protecting market stability and fair and orderly trading.
However, if the goal of promoting better access to markets for SMEs is to be achieved, existing secondary trading rules aimed at attempting to protect the price formation process will need to be fundamentally redrawn. For this reason, we invite the European Commission, Parliament and Council to be bolder and consider exempting SMEs stocks from the double volume caps that will apply to pools of non-displayed liquidity from January 2017.
Rob Boardman is CEO of execution and research Broker ITG
Click here to read the full ESMA response to the Commission Green Paper on building a Capital Markets Union