The Association for Financial Markets in Europe (AFME) has today published a new report, commissioned from Expand Research LLP, which finds that the cost associated with fixed income market data has soared between 2017-2021, increasing by 50%. This has been driven by price increases of 35% on the existing cost base and new, incremental usage which accounts for an additional 15% of spend. This is compared to a 25% price increase for sell-side market data more generally. Fixed income data costs are therefore rising much faster than the average cost of overall market data. The report, “The Rising Cost of European Fixed Income Market Data”, identifies the sources of rising market data costs within fixed income markets and proposes solutions to encourage greater liquidity, efficiencies and growth in European markets, which play a critical role in providing funding for governments and corporates. Adam Farkas, Chief Executive of AFME, said: “Our latest report finds that fixed income market data costs have increased far beyond those for equity markets, which are already considered to be too high. Unnecessarily high market data fees act as a barrier to entry to financial markets and ultimately lead to detrimental outcomes for end investors through less choice and higher costs. “This report chimes with recent concerns raised by the Financial Conduct Authority in the UK in its January feedback statement on accessing and using wholesale data, and with the EU Commission MiFIR review objective of enhancing users’ understanding of how the price for market data is set across asset classes. Rising market data costs is a market-wide problem which must be tackled as a standalone issue. While a consolidated tape has been suggested as a solution, it will not fix the fundamental issue of rising market data costs. For a tape to be effective and to contribute to open and competitive markets which serve end investors, it must be built on cost-effective data. “If market data costs go unaddressed, market participants may be forced to scale back their data purchases which could lead to other strategic decisions, such as withdrawing from certain markets.” This report is based on data voluntarily submitted by 10 major European fixed income market makers, all of whom are AFME members, as well as publicly available sources. Expand collected European fixed income market data spend data from participant organisations for the years 2016-2021. Key findings: Costs in all categories have increased, with the composition of data spend significantly different than for equities. Buyside costs have also increased significantly. Figure 3 of the report demonstrates that costs have increased regardless of the number of market data users and is driven by price increases and changes to charging structures. Figure 3 also demonstrates that the cost of sourcing the data is rising yearly and the trend is likely to continue, steepening the trajectory further. As a result, increasing market data costs are likely to have forced some consumers to scale back their data purchase to a minimum and often to economically suboptimal levels. In some cases, it could lead to strategic decisions to withdraw from specific markets. The report identifies a first step to achieving more reasonable fixed income data costs is to establish and apply a set of industry developed standards to fixed income market data across the industry. These should cover: Standardised pricing models for purchasing data from all vendors. Uniform formats in which the data is stored and provided to firms. A consistent procedure for accessing the data. The full report can be downloaded from the AFME website. – Ends –

In light of the continuing negotiations on the Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD), the Association for Financial Markets in Europe (AFME) has today published a paper welcoming the progress made so far and highlighting priorities for the Directive to be effective and proportionate. Finalising EU sustainability reporting standards has become especially urgent to enhance the availability and comparability of sustainability information, provide banks with the sustainability information needed to scale sustainable finance and to address the problematic sequencing of ESG disclosure rules. Oliver Moullin, Managing Director for Sustainable Finance at AFME, said: “Putting in place an effective corporate sustainability reporting framework is an urgent priority to enhance the availability and comparability of sustainability information. “Maximising the compatibility and consistency of EU and international standards and ensuring a proportionate approach to reporting on activities outside the EU is essential for the effectiveness of the EU corporate disclosures framework. The CSRD risks having a disproportionate impact on internationally active companies, which will have to report on their worldwide activities, including in jurisdictions where the necessary data is not yet available. “AFME believes that it is important to ensure a proportionate application to internationally active companies through limiting the scope of reporting to EU activities, at least for an initial period, and introducing greater proportionality in the scope of application to companies based outside the EU.” AFME’s paper “The importance of the international context for the CSRD” raises these concerns, particularly in light of recent momentum towards the development of international sustainability reporting standards. AFME also highlights the importance of maximising the compatibility and consistency of EU standards with the forthcoming international standards. It provides recommendations to introduce more proportionate requirements in the proposal, including by: limiting the scope of reporting to EU activities and EU exposures to companies that are subject to the same CSRD and Taxonomy transparency rules, at least for an initial period; and introducing greater proportionality in the scope of application to companies based outside the EU. AFME has also published additional feedback addressing other key issues being discussed by the co-legislators, including: Supporting the Commission’s proposal for a proportionate inclusion of SMEs in the scope of the requirements. The proposal takes a proportionate approach by minimising the reporting burden through a dedicated, simplified standard and by allowing three additional years for SMEs to start reporting. Raising concerns with any further extension of the scope of the CSRD to non-EU companies. Instead, AFME calls for greater proportionality and close cooperation among international standard-setters to reduce fragmentation and facilitate the flow of sustainability information across jurisdictions. Highlighting the importance of maintaining the Commission’s proposed exemption for subsidiaries to report separately where covered by a parent entity’s consolidated report. Supporting concerns that have been raised with reporting on intangible assets (such as information on intellectual and human capital) and suggesting that companies could choose to provide additional disclosures on intangible assets when they deem them material to their sustainability profile. Ensuring that the legislation provides for appropriate sequencing of disclosures by the non-financial and financial sectors, providing for financial institutions to report under the CSRD one year after non-financial companies, in line with disclosures under the Taxonomy Regulation. The full international context for CSDR paper can be downloaded from the AFME websitehere. AFME has also published a short position paper on its priorities for the negotiationshere – Ends –

The Association for Financial Markets in Europe (AFME) has today published a position paper in the context of the negotiations on the establishment of an EU Green Bond Standard (GBS). Oliver Moullin, Managing Director for Sustainable Finance, said “AFME strongly supports the establishment of a voluntary EU Green Bond Standard which facilitates the further growth of the market and is an important source of financing for the transition to Net Zero.” “AFME supports the proposals to provide investors with transparency, comparability and confidence in the credibility of the bond’s environmental credentials. In order to meet these objectives, it is important that the new EU GBS label is seen as a credible standard and also attractive to issuers and investors. Our recommendations to further this goal include maintaining the voluntary nature of the standard, providing for GBS designation to apply to maturity, maintaining the scope of environmental sustainability, and avoiding creating different standards for different types of issuer.” AFME makes the following recommendations to support the establishment of an effective and successful label for EU Green Bonds: It is important to maintain the voluntary nature of the EU GBS standard to avoid constraining the growth of the market while more investable projects become available. The EU GBS was envisaged and designed as a voluntary standard to support the growth in issuance and to develop deep and liquid green bond markets in the EU. Making the GBS mandatory would be likely to overly constrain issuance in the EU, given the limited availability of taxonomy-aligned investments, in particular in the short term. Green Bonds should maintain their designation until maturity following a change to the Taxonomy criteria. For investors, the certainty that bonds keep their label for the entire term is a necessary condition to build investment portfolios. EU GBS should remain focused on environmental sustainability. Its distinguishing feature is the link with the EU Taxonomy Regulation, a dynamic and science-based classification system for environmentally sustainable economic activities. It is therefore important that the scope of the standard remains environmental sustainability. The GBS is also not the appropriate regulation to establish requirements for companies to develop transition plans, which is best dealt with through regulation on sustainability disclosures. Creating different requirements across issuers and issuances should be avoided. Whether or not any flexibility regarding Taxonomy-alignment is provided, the criteria should be the same for all issuers, without distinctions being made between sovereign and private issuers. A differential treatment would threaten the proposal’s harmonisation objectives, adding complexity for issuers and confusion for investors. – Ends –

The Joint Associationswelcome clarification from ESMA that national competent authorities are expected not to prioritise supervisory actions in relation to the application of the CSDR buy-in regime. We support the political agreement by the EU legislators on changes to Regulation (EU) No 909/2014 (“CSDR”) that allow for a delay to the implementation of mandatory buy-ins. The Joint Associations advocated for a reassessment of this aspect of the settlement discipline regime as part of the broader CSDR Review. The Joint Associations support a result that achieves the regulatory objectives in an effective and proportionate way, and that avoids significant negative consequences for market liquidity and stability. While further formal steps need to be taken for the changes in the political agreement to be put into effect and formally adopted and published as EU law, the political agreement reflects the intent of EU legislators that mandatory buy-in requirements in the current CSDR should not go live on 1 February 2022. The Joint Associations therefore believe that EU legislators do not expect market participants to take further action towards implementation of the mandatory buy-in requirements, due to come into effect on 1 February 2022, including but not limited to the contractual obligations of Article 25 of RTS (EU) 2018/1229 on Settlement Discipline (“CSDR RTS”). On this basis, those associations that were intending to publish industry standard documentation to facilitate compliance with the mandatory buy-in requirements, will no longer be proceeding with publication. With respect to all other CSDR settlement discipline measures (i.e., Articles 1 – 20 and 39 – 42 of the CSDR RTS) it is expected that market participants will proceed with implementation in accordance with the relevant regulatory deadline of 1 February 2022. These requirements include rules relating to cash penalties for settlement fails, and requirements relating to the allocation and confirmation process. The Joint Associations encourage all national competent authorities in the EU to follow the guidance provided by ESMA on 17 December 2021. We stress the importance of ensuring full consistency with ESMA’s guidance to avoid a risk of uncertainty for market participants in any EU jurisdiction. The Joint Associations welcome the opportunity for further engagement with the regulatory authorities on the important topic of increasing settlement efficiency in European capital markets.

Following the publication of ESMA’s AnnualStatistics Report(ASR) on 17 December, the Association for Financial Markets in Europe (AFME), issued the following statement: AFMEsupportsESMA’s continued efforts to provide a detailed overview of trading activity in securities markets through the publication of its AnnualStatistics Report(ASR).However,AFMEnotesthere remain challenges relating to the granularity of data which is available to ESMA. The result is thatthe annual report does notyetprovide a clearand accurate understandingof where tofind liquidityin EU equity markets. AFME also notes that ESMA has taken the decision topresent data relating to trading in EUsharesbothincludingand excludingUK trading venuesas well as Systematic Internalisers(SIs) and Over The Counter (OTC).Nevertheless,the main issue remains that none of this data accurately represents the reality of the trading landscapesince it doesnot capturethe liquidity truly available to market participants.At this stage, itthereforedoes not provide a basis upon which future policy decisions can be built. Rick Watson, Head of Capital Markets at AFME, Rick Watson,commented, “ESMAhasacknowledgedthatdatacurrently at its disposaldoes notallow for a clear pictureofexisting market structureto be drawnandisseeking toaddressthisviaareview theofregulatory reporting frameworkfor equitytrading.Webelieve that this review will prove beneficial not only in the context ofdata published in futureASRs,but also as a vital step to ensuring the successful delivery of a pre- and post-trade consolidated tapefor equities.” “In the absence of accurate consolidated dataon the EU trading landscape for equities, AFME publishesits ownquarterly analysisof sharetrading according to executionmechanism.This analysis usesdataflags and identifiers to providea more refined and, in ourview,accurate representation of addressable marketliquidityacrossEurope, including the EU27, the UK andSwitzerland.Our datashows that on-venue trading for Q3 2021 represented 82% of overall trading activity, whiletrading onSIand OTCrepresented 10% and 8%respectively.” – Ends –

The Association for Financial Markets in Europe (AFME) has appointed Shaun Baddeley asManaging Director,Securitisation, leading theAssociation’sworkonsecuritisation regulatory reform.ShaunsucceedsRichard Hopkin, who is retiringat the end ofthis monthafter 11 yearsat AFME. Shaunhasnearly 25 years of experience in thesecuritisationindustry, having mostrecently workedforSantanderasManaging Director, Head of European ABS in Global Debt Financing at Santander’s CIB. He hasalsoworked forBanco Santanderin various rolessince 2008,all in securitisation,acting as arranger and lender, covering funding,capital management, relevant PrudentialRegulationand ESG matters. Prior to this,he spent ten years at Fitch Ratings, and before that began his career in the British Army where he was a Captain in the Royal Armoured Corps.. Rick Watson, Head of Capital Markets at AFME, said:“We are delighted to appoint Shaun asManaging Director of Securitisation. He isawell-knownand respectedmarket practitioner with extensive experience bothatUK and EUlevel.Welook forward toworking with him to takeforward AFME’s advocacy on securitisation regulatory reform, particularly as the EUplans to review the regulationnext year.” “We would also like tothank Richard for allofhis work forAFMEover the last 11 years,havingledtheEuropean securitisation industry through a crucial time of rebuilding after the global financial crisis.Together with membershehas worked tobuild and shape several crucial regulatory responses,including the Basel framework, the EU Securitisation Regulation and the concept of‘SimpleTransparent andStandardised securitisation’. We wish him well in his retirement.” Shaun Baddeley, Managing Director of Securitisation, said:“The European and UK securitisation industry is at an important crossroads and I look forward to taking forward AFME’s leadership in securitisation to the next stage, particularly in green securitisation which will play an even greater role as anessential tool for greening the economy.” –Ends –

The Association for Financial Markets in Europe (AFME), the European DataWarehouse (EDW) and True Sale International (TSI) have today published the first in a series of regular reports on the private cash securitisation market in the EU and UK. The Report demonstrates the importance of the private securitisation market in funding the real economy and aims to further enhance the quality and usefulness of disclosure in the private cash securitisation market in the EU and UK. To do this, it provides transaction-level data from 12 banks active in European private cash securitisation market, both ABCP and non-ABCP funding (it does not cover public term bond securitisations or synthetic securitisations). Richard Hopkin, Head of Fixed Income at AFME, said: “Private cash securitisation transactions provide important additional lines of credit to businesses across Europe. Many corporate borrowers favour such transactions because they allow for efficient future amendment, extension and restructuring through direct negotiation between the parties. They can also be an important source of finance for start-ups and new originators, prior to refinancing in the public term bond market. We hope that this report series can provide a further useful tool of reference for market participants and supervisors tracking the evolution of the European securitisation market.” Jan-Peter Hülbert, Managing Director of True Sale International GmbH, said “The report provides further evidence of the huge benefit of private securitisations for financing the real economy. Trade receivables, auto loans and leases as well as equipment leasing are the key asset classes in this segment, and they have performed very well before, during and since the global financial crisis. ABCP and other private securitisations provide access to capital markets financing especially to corporates and non-bank FIs together with their banking partners.” The Report highlights how the private cash securitisation market is vital to the real economy, providing: an important source of finance to the real economy: over 80% of transactions by volume fund sellers in the EU, and over 70% to the real economy; as well as an important source of finance supporting lower rated sellers with cost effective financing, demonstrating the transformative power of capital markets securitisation - 84% of transactions by volume were undertaken by sellers with ratings of BBB and below while the average transaction rating is in the range A to AA. AFME and TSI members are strongly committed to disclosure that is sensible, proportionate, of high quality and useful for investors and supervisors. The participants in this wide-ranging exercise took part on a voluntary basis, demonstrating their commitment to providing good quality and useful data, in order to reassure market participants and supervisors. These banks, together with all AFME and TSI members, look forward to continuing constructive discussions with the EU and UK authorities on how to improve and make more effective the framework for securitisation disclosure in general in the EU and UK, as set out in their response to the Article 46 consultations. – Ends –

Following the publication of the European Commission’s Capital Markets Union (CMU) package, including a legislative proposal for the MiFIR Review, Adam Farkas Chief Executive of the Association for Financial Markets in Europe (AFME), commented: “Today’s package is an important step to re-energize the CMU project. This is a real chance to drive forward ambitious policies that strengthen the capacity of EU capital markets to serve the European economy. A structural equity gap remains in Europe and there is still much work to do on enhancing the provision of risk capital to meet the major long-term investment needs of the coming years. These challenges will only be addressed by a review of MiFIR that supports efficient and competitive capital markets and that promotes wider investor participation.” With respect to the MiFIR proposals, Adam Farkas commented: “The proposal for a consolidated tape is at the heart of today’s package and is essential for delivering CMU. AFME members agree a real-time tape for equities is the right solution, but the devil will be in the detail when it comes to its final design and we look forward to engaging with the co-legislators on this. “Making real-time equity market data available to all investors will provide a single view of trading in Europe, which is key for creating a truly pan-European market. This will not only promote more attractive and competitive capital markets in Europe, but it could also help to reduce home country bias in the EU, where investors tend to prefer companies from their own country. While a consolidated tape won’t deliver CMU on its own, it is an important next step to creating a truly unified, investable and tradeable market in the EU. “Regrettably, the proposal made public today does not prioritise a consolidated tape for equities with pre-trade trading data. We urge the co-legislators to extend the scope of the consolidated tape for equities to include pre and post trade trading data from the outset. “Of course, the consolidated tape will only be as good as the data that feeds into it. It is encouraging that the Commission is prioritising data quality issues and has set up an expert group to advise on the topic. We encourage the co-legislators to put frameworks in place that allow supervisors to capture a more accurate picture of the trading landscape. “In view of the poor quality of the existing trading data sets, we caution against further adjusting key fixed income or equity market structure features at this point without proper evidence and before the consolidated tape is enacted. AFME supports ESMA’s acknowledgement that the existing data does not fully reflect the equities or bonds trading landscape, and that further work is needed to improve existing evidence. “While AFME members are strongly supportive of well-calibrated, transparent fixed income markets, analysis of comprehensive data is essential for this accurate calibration to ensure an informed, balanced and effective transparency regime. As such, AFME would like to first see the development of a bond consolidated tape and to then make any necessary changes to the post-trade transparency regime once sufficient data has been gathered. This will avoid exposing committed liquidity providers to potential undue risks, especially when trading in illiquid instruments or transactions above a certain size, because if not properly considered, it may lead to diminishing liquidity available to corporates and investors.” With respect to the other parts of the CMU package, AFME is fully supportive of the establishment of a European Single Access Point (ESAP) for financial and non-financial information publicly disclosed by companies. If appropriately designed, the ESAP has the potential to enhance cross-border investors’ access to company data. It should be configured with the primary goal of increasing the availability and transparency of companies financial and non-financial ESG disclosures for the benefit of end investors without increasing costs or administrative burdens for corporates or end investors. – Ends –

Following the postponement of the of Mandatory Buy-in provisions (MBIs) under the Central Securities Depositories Regulation (CSDR), Pablo Portugal, Managing Director of Advocacy at the Association for Financial Markets in Europe, said: “We strongly welcome the agreement by EU legislators to postpone the implementation of the mandatory buy-in provisions in the Central Securities Depositories Regulation (CSDR). The mandatory buy-in rules have been widely acknowledged as being flawed and disproportionate. Their impact would lead to wider spreads and less liquidity, meaning more expensive and less efficient capital markets for Europe’s issuers and investors. “We therefore support the approach to decouple the implementation of the mandatory buy-in rules from all other aspects of the settlement discipline regime. This would allow other appropriate measures, such as the penalties regime, to take effect as planned in February 2022, but avoid implementation of the current buy-in rules. “Market participants will be awaiting further clarity from European authorities on the implementation of settlement discipline measures in February 2022 following today’s announcement. “The planned review of the CSDR in 2022 should fundamentally reconsider mandatory buy-ins and lead to a more proportionate regime that supports Europe’s capital markets.”

A new report by the Association for Financial Markets in Europe (AFME) and Linklaters titled, “Sustainable Finance in Europe: Regulatory State of Play” provides a practical guide to the significant number of initiatives which make up the regulatory framework for sustainable finance in the EU, UK and Switzerland. It highlights how the banking sector is impacted and makes recommendations to further the goal of developing sustainable finance in Europe. The report provides analysis and identifies key milestones and actions for the banking industry in the five key elements of the European sustainable finance regulatory framework including: Sustainability reporting and disclosures; The development of taxonomies for sustainable activities; The development of market standards; Incorporation of ESG into banks’ risk management; and Initiatives relating to sustainable corporate governance. Oliver Moullin, Managing Director for Sustainable Finance at AFME, said: “Important progress has been made on the regulatory framework for sustainable finance. As we heard at COP26, it is essential to get the regulatory “plumbing” right to facilitate investments in support of sustainability goals. “The urgency of action has spurred an unprecedented number of initiatives in a short space of time. This report provides a practical guide for banks, helping them and their clients navigate the various initiatives; and highlights recommendations in support of the crucial goals of mobilising finance and ensuring the resilience of the financial sector to climate-related risks.” Vanessa Havard-Williams, global head of environment and climate change at Linklaters, added: “Momentum is building globally on sustainable finance. Market participants face both opportunities and challenges in navigating the ever-evolving legal and regulatory framework. Having an understanding of this shifting landscape and what actions should be taken, which we hope this report provides, is key to keeping aligned with regulatory expectations and bringing about change in the long-term.” AFME assesses the current state of play of the European regulatory framework and highlights three priority areas to facilitate the flow of capital to help achieve sustainability objectives: Finalising effective foundations Significant progress has been made over a short space of time, but it is important to finalise and implement effective regulatory building blocks as enablers of sustainable finance including (a) developing a disclosure framework for sustainability reporting; (b) providing a common classification system of sustainable economic activities; and (c) ensuring that ESG risks are effectively integrated into banks’ risk management. Ensuring coherence and consistency Due to the urgency of the task to tackle climate change, a very large number of initiatives have been put in place in a short space of time. While recognising the urgency of the task at hand, it is necessary to ensure that the framework is coherent and consistent, particularly as many aspects are complex and interconnected. As the foundations are finalised, AFME calls on policymakers and regulators to carefully consider the coherence of the framework as a whole to ensure that it is meeting its goals of facilitating the allocation of investment to meet sustainable objectives, avoids undue complexity and overlapping, duplicative or inconsistent requirements. Further enhancing the consistency, understanding and usability of the framework would facilitate its implementation and help support well-functioning sustainable finance markets. Strong international coordination Climate change and other sustainability objectives are a global challenge which necessitates an internationally coordinated response. In order to maximise the benefits of sustainable finance, it is vital to leverage international capital markets and to provide a coherent approach for multinational businesses and financial institutions which are key to supporting the transition.