A recent survey highlights a strong desire among traders from large investment funds for reduced regulatory constraints in Europe, which they believe hamper innovation in the equity markets. Among the surveyed participants, 25% expressed that Europe’s regulations are more restrictive compared to other regions, emphasizing the need for a consolidated tape as a key reform. This sentiment was particularly prevalent among medium-sized (33%) and small fund traders (27%), who argued that such measures could help lower market-data costs. Additionally, approximately 21% of respondents indicated support for reversing the competitive landscape shaped by MiFID I and II by reducing the number of trading venues.
Many larger institutions feel that EU regulators fail to consider the broader market implications of their policies, often tilting outcomes in favor of exchange operators. This perceived oversight may discourage equity-market innovation and is exacerbated by the regulatory divergence following Brexit. As the UK has eliminated double-volume caps on dark trading, the EU has instituted a single-cap system, complicating cross-border trading dynamics.
European IPO activity has stagnated recently, with many firms choosing to stay private or list in the US. Among senior traders, 20% admitted uncertainty about how to revitalize IPOs, though they agreed that structural changes are necessary, emphasizing the importance of increasing retail participation and enhancing valuations.
Regarding regulatory measures, approximately 31% of traders from mid-sized funds advocated for eliminating stamp duties to enhance competitiveness, while some (12%) suggested easing executive pay restrictions to better reward substantial performance. Respondents noted that the ongoing Saving & Investment Union consultation represents a timely opportunity for reform.
In the realm of trading operations, European institutional investors predominantly oppose the implementation of 24/5 or 24/7 trading hours. Over 75% of survey participants voiced their disapproval, concerned that extended trading hours could dilute liquidity. Instead, many advocated for revisiting earlier discussions about reducing trading hours to concentrate liquidity and create a more efficient market structure.
A significant portion of the respondents expressed interest in increased access to retail flow, with almost two-thirds of senior buyside traders supporting this idea. Retail flow is perceived as less toxic compared to other forms of equity flow, providing institutions with opportunities to enhance liquidity. Furthermore, support exists for on-venue trajectory crossing models, which match large orders internally to minimize market impact; 44% of large and 41% of medium-sized buyside funds favor these models, highlighting a divergence in EU regulation from practices already allowed in the UK and Switzerland.
When it comes to the proposed consolidated tape to streamline market-data access, interest is lukewarm, with only 28% of participants favoring the initiative. Those backing the idea, particularly among smaller institutions, see it as a potential way to cut costs. However, there’s a strong preference for a comprehensive tape that includes both pre- and post-trade data. Currently, only 24% support the EU’s proposal, which excludes pre-trade data.
Looking at settlement processes, an overwhelming 79% support Europe’s shift to next-day (T+1) trade settlement, particularly among UK (91%) and North American (90%) funds. While the US has transitioned smoothly to T+1, the European move is expected to be more complex due to the need to coordinate among various central securities depositories.
As for the clearing landscape, over half of UK traders expressed support for pan-European clearing to streamline and reduce costs associated with Europe’s fragmented system. Horizontal clearing, which allows trading across jurisdictions without centralized control, could significantly enhance efficiency and interoperability for market participants.
Overall, the survey underscores a pressing need for regulatory adjustments and structural reforms to foster competitiveness and innovation in European equity markets.
