EU looks to Wall Street to solve fragmented share trading puzzle

EU looks to Wall Street to solve fragmented share trading puzzle

© Reuters.  © Reuters.

By Huw Jones

LONDON (Reuters) – Stock exchanges in the European Union could back each other up to avoid platform outages leading to extended market freezes for investors, a senior European Union official said on Wednesday.

Euronext and Deutsche Boerse (DE:DB1Gn) have both had trading glitches in recent months and when the primary market for a listing goes down, other platforms that offer a secondary market in the same stock are also forced to suspend trading.

To get around this problem, Tilman Lueder, the European Commission head of securities markets, said the EU could copy the American model whereby Nasdaq offers trading in NYSE listed shares during any NYSE outage, with the reverse if Nasdaq fails.

"If either one goes down, there isn't this vacuum," Lueder told a QED event.

Brussels is looking at ways to make markets more efficient and will propose a law next year to create a "consolidated tape" of share transactions from the main platforms to offer investors a market snapshot for spotting the best prices.

Lueder said a tape, long a feature on Wall Street, could also avoid outages freezing markets and he will assess how to improve the quality of the data needed, which could mean mandating a common reporting "protocol".

"That is a huge challenge. We are going to be working with industry on the right protocol," Lueder said.

"It is much too early to say if it will be one tape or several competing tapes."

A tape will put pressure on exchanges to cap or cut the price of their share prices data, as already being demanded by banks and asset managers, prompting bourses to fight back.

"There is no convincing regulatory case for a consolidated tape yet on the table," Alexandra Hachmeister, head of market data at Deutsche Boerse, said.

"The proposed regulatory interventions are significant, and I don't see they are effective or proportionate. I don't see how they can help in terms of investor protection and creating a more viable capital markets union," she added.

Original Article

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