FIA has responded to the European Securities and Markets Authority’s proposed transparency regime for exchange-traded derivatives. FIA members support maintaining a high degree of transparency for ETDs and welcome the simpler and streamlined approach to post-trade transparency.
The response notes it is essential to consider how a specific market is being used, by understanding the central limit order book and the size of business that can be executed in that order book in a short amount of time without causing price slippage. Moreover, it is important to distinguish between ETD and OTC product specificities.
Regarding post-trade transparency, opting for a more granular assessment leaves more flexibility to trading venues, which can react swiftly to changing customer demand while the regulation sets the boundaries of this flexibility. However, it is essential to apply granularity in an appropriate manner. Market capitalisation of firms and the average daily notional amount of single stock products vary substantially.
Among some of the options considered in the consultation paper, none assesses this dimension. In the past post-trade deferral regime, LIS and SSTI thresholds had different granularity bands depending on the average daily notional amount of a given product class. In the new regime, granularity stems entirely from the liquidity assessment. FIA believes it is essential to consider average daily notional amount ranges in the liquidity assessment, even if not with the same granularity as before.
Read the response in full here.
