An Update From Cboe Europe President David Howson, June 2020

David Howson, President, Cboe Europe, reached out to European customers at the start of June with an update on the current market environment. Read his letter below.

Dear Clients and Members of the Trading Community,

I hope everyone continues to stay safe and well during these unprecedented times.

I promised in my first update in April that I’d be in touch with you all more often, so this is me making good on that promise! Working remotely has also reinforced the importance of regular communication and, with that in mind, I wanted to share a few Cboe updates that I think you’ll find useful.

MiFID II/MiFIR Review

We welcomed the opportunity to respond to the European Commission’s public consultation on the review of the MiFID II/MiFIR framework last month. You can read our full response here.

This review is even more timely in light of the COVID-19 pandemic, to help ensure Europe’s capital markets operate on a level playing field, remain attractive to and accessible by all types of investors, and promote choice and competition at every part of the value chain. The influence of MiFID II on regulation globally also means we must ensure any changes are appropriate and well-balanced.

In equity markets, we believe recent months have in many ways demonstrated the strength of Europe’s market structure, and the benefits of the diverse eco-system that exists. While this framework can certainly be enhanced in certain areas, we must ensure the MiFID II review doesn’t reverse the positive changes introduced over the last 10 years which have proved highly beneficial to end investors.

With that in mind, we were encouraged by a series of recommendations put forward by the Dutch Authority for Financial Markets recently regarding the MiFID II review, which can you read here. The AFM reiterated its support for all pre-trade transparency waivers in equities, as well as simplifying elements of the DVC regime.

Some of the key recommendations that we made in our response to the European Commission include:

• A real-time pre- and post-trade consolidated tape for equities, which aggregates data from all markets
• A removal of the double volume cap mechanism, which has introduced cost and complexity with no clear benefit for end investors
• Clarifying the share trading obligation in relation to third-country shares and applicable exemptions, but retaining Systematic Internalisers as eligible execution destinations
• Retaining all pre-trade transparency waivers, to ensure choice for investors and support a diverse range of global trading strategies and different market conditions
• Preservation of the ability to execute at the mid-point, as a globally accepted execution point and the fairest price to buyer and seller
• A commitment to follow through on the non-discriminatory and open access provisions for all asset classes

Consolidated Tape

A consolidated tape for equities, or lack thereof, was unsurprisingly a major focus of the EC’s consultation. As I’ve experienced first-hand in recent months while serving on the European Commission's High Level Forum on Capital Markets Union, this issue continues to divide opinion. At Cboe Europe, we have always been an advocate of a consolidated tape to create a viable alternative to the direct data feeds offered by national exchanges. It would offer many benefits, including: providing a low-cost and straightforward way to access pan-European consolidated liquidity allowing for better informed investors and supporting price formation; and, by acting as a source for regulators to track cross-market activity, materially improving the stability and safety of the European market. Critically, it would also broaden access to data for all European companies – particularly SMEs – in a consistent format, helping to encourage further financing.

We have set out our full views on the creation of a consolidated tape, including features of our preferred model, in a position paper here.

As always, I look forward to receiving any feedback on our recommendations.

Best regards,