Press release available inEnglish,French,German,Italian,Spanish. Individual country analysis available forFrance,Germany,Italy,Spain. The Association for Financial Markets in Europe (AFME) in collaboration with eleven other European and international organisations has today published the fifth edition of the “Capital Markets Union – Key Performance Indicators” report, tracking the progress of Europe’s capital markets against nine key performance indicators and analysing the progress over the past five years. Among the key findings of the 2022 report: Socio-economic and geopolitical developments have caused a major reversal of capital markets activity in 2022 compared to the record gains of market-based financing levels of the previous two years. Inflationary pressures, exacerbated by the Russian invasion of Ukraine, and combined with monetary tightening and fears of recession following the Covid-19 pandemic, have led to an increase in the cost of capital and created a climate of market uncertainty and volatility more generally. Market-based funding used by corporates dropped to pre-Covid levels - total new debt and equity issuances decreased by 32% year-over-year during the first half of 2022, with a particularly steep decline (86%) in EU Initial Public Offerings. Europe’s equity gap grew wider with the EU’s domestic market capitalisation of listed shares declining from 18% in 2000 to just 10% of the world’s total in 2022, causing Europe to further fall behind the US and UK in the global capital market competitiveness ranking. Pre-IPO equity investment in EU SMEs remained strong with €34.3bn in new equity investment flows in the first half of 2022, or 73% of the amount invested in 2021. However, a growing challenge for investors is the capacity to exit investments as the IPO market remains subdued and public markets see lower valuations. European households saw a decline in their savings in the form of capital markets instruments due to deterioration in asset values. EU securitisation transactions fell to lowest levels on record with the proportion of EU loans outstanding transferred via securitisation and loan portfolio sales falling to 1.6%, the lowest value on record and half the value in 2018 (3.2%). US securitisation issuance grew 74.5% during 2020-2021 vs 2017-2019, while EU issuance declined 10.9% over the same period. Remarkable ESG growth over last five years – with the amount of EU ESG debt issuance increasing from €61bn in 2017 to €360bn in 2021. EU green bond issuance continued to rise in 2022, albeit at a slower pace this year, with volumes up 8% year-on-year in the first half of 2022, compared to the 74% increase in 2021 which was largely due to sovereign issuance. An improved EU FinTech regulatory ecosystem While FinTech funding was down across the globe since the peak of last year, the number of EU Fintech unicorns increased from 13 to 18, suggesting an overall improvement in the environment for financial technology. Compared to 2021, three additional countries (Italy, Latvia, and Slovakia) deployed regulatory sandboxes. Now, 13 out of 28 countries (EU 27 + UK) provide this regulatory feature. The report was authored by AFME with the support of the Climate Bonds Initiative (CBI), as well as European trade associations representing: business angels (BAE, EBAN), fund and asset management (EFAMA), crowdfunding (EUROCROWD), retail and institutional investors (European Investors), publicly quoted companies (EuropeanIssuers), stock exchanges (FESE), venture capital and private equity (InvestEurope), private credit and direct lending (ACC) and pension funds (PensionsEurope). – Ends –

A group of nine organisations representing key participants in the European securitisation market have written a public letter to EU policymakers, calling on them to take urgent targeted measures to ensure that securitisation can support the European economy during a testing period marked by macroeconomic uncertainty. The group includes the Association for Financial Markets in Europe (AFME), the Dutch Securitisation Association, the European Banking Federation (EBF), the International Association of Credit Portfolio Managers (IACPM), Leaseurope, Eurofinas, Paris EUROPLACE, PCS and True Sale International (TSI). The letter calls for urgent action as it highlights how securitisation volumes in Europe have continued to decline in 2022,in sharp contrast to the growth seen in other markets in recent years. The United States, for example, recorded its highest ever issuance levels in 2020 and again in 2021. It is also a critical moment for the European securitisation market as key regulatory workstreams are underway which could contribute to the recovery of the market or exacerbate current regulatory imbalances. For example, targeted measures in the prudential requirements for banks under CRR3, and insurers under Solvency 2, together with a well-designed EU Green Bond Standard, would be important steps towards a better functioning market. The organisations are therefore calling on EU legislators to use these discussions to introduce immediate adjustments to securitisation-related calibrations and concrete mandates for more risk sensitive revisions to be undertaken as a subsequent step. There are also critical technical standards under preparation which could negatively impact the market if further disproportionate requirements are introduced. The joint Association leaders write in the letter: “The absence of a well-functioning securitisation market represents a strategic loss to the European financial system. It is undermining the competitiveness of European financial institutions and limiting their ability to recycle capital to support new financing. It has encouraged institutional investors to shift towards other products that do not offer the same advantages in terms of protection, transparency and liquidity.” “At the heart of the problem is a disconnect between the Commission’s vision for securitisation in Europe – a tool making a significant contribution to a well-functioning financial system that efficiently finances the real economy – and aspects of the regulatory framework which remain miscalibrated and, in practice, disincentivise issuance and investment in securitisations, thus holding back the tool’s potential to support the economy.” The full letter can be found here -ENDS -

The Association for Financial Markets in Europe (AFME) and FINBOURNE Technology have today published the second in a series of new reports, which analyses EU sovereign and public bond trading data consolidated from numerous sources for the period of March to December 2021. This report follows an earlier April 2022 report which focused on the corporate bond trading landscape. The new data from this report demonstrates the following principal findings: There is a high degree of trade transparency in EU sovereign bond markets, especially when compared to corporate bond markets, with a significant majority of EU government bond trades (76%) currently being made real-time transparent (compared to 8% of corporate bond trades). However, the quality of the sovereign data set is materially worse than the corporate bond data set due to a high level of distortion caused by the inconsistent use of some flags, among other issues. This needs to be addressed by ESMA. The majority (60%) of government bond-related trades on EU venues are non-EU bonds from the US, UK and other countries. Notably, Table 1 shows the trading volume of US Treasuries is nearly the same as for all EU issuers (circa 40% of total volumes). This means it is currently hard to have a clear view of the trading of EU-based issuers with the large amount of trading in the EU by non-EU issuers clouding the picture. AFME believes improvements could be made, for example, by narrowing the scope of MiFIR trade reporting to only cover EU-issuers, which would then be the basis on which deferrals should be calibrated. This would be similar in some respects to the US TRACE system, which focuses only on securities issued in the US. This re-focus would further support an EU fixed income consolidated tape focused on EU markets. Adam Farkas, Chief Executive of AFME, said: “This second data analysis from AFME and FINBOURNE Technology reiterates the importance of an accurately calibrated deferral regime for EU sovereign bonds. This would help grow the EU fixed income market by focusing on opportunities to further increase transparency where appropriate, while carefully calibrating deferrals to avoid causing undue risk for market makers, which could negatively impact the amount of liquidity that they are able to provide. “In order to further improve transparency, AFME believes MiFIR reporting of sovereign and public bond trading activity should be analysed by ESMA to confirm precisely through data analysis where increased transparency will not damage market liquidity.” Thomas McHugh, CEO and Co-Founder, at FINBOURNE Technology, said: “Once again, we’re delighted to work with the AFME team and its working group members to support their evidence-driven approach to policy formulation. The analysis for this paper required an extremely granular approach to transaction records, made possible by our Modern Financial Data Stack. We hope, that by constructing this data, we can jointly deliver the transparency needed, to clarify some of the key issues impacting the creation of a consolidated tape. As always, our core principle is to liberate, simplify and connect data and this paper goes some way to showing the benefits of a single consolidated view of transactions to inform market participants, regulators and EU authorities.” The report provides extensive data on sovereign bond risk position trade-out times (i.e. the time it takes to move the risk off the bank’s balance sheet). This data demonstrates a wide range of times depending on issuers, trade sizes and issue sizes, ranging from very short to very long. This shows that larger and illiquid transactions require carefully calibrated and, in some instances, relatively long, deferral periods to ensure optimal market liquidity (as otherwise liquidity providers can be unduly placed at risk). These larger and illiquid trades comprise a small percentage of the number of trades, but a much larger percentage of volume. Likewise, the data shows that trade-out times for other trades can be very short, justifying no or short deferrals in those instances. The AFME paper analyses approximately 1.8 million post-trade records on 8,200 distinct sovereign and public bonds. From the data set studied, AFME and FINBOURNE Technology find that different deferral periods need to be applied based on the trade size and issuance volume, among other key characteristics. Applying an incorrectly calibrated deferral regime to all trades, especially those larger in size or illiquid, risks exposing liquidity providers to potential undue risks, which could negatively impact the amount of liquidity/pricing that market makers are able to provide. Key findings: Tables 3 and 4 show that currently ‘real time’ reporting on EU sovereigns/public bonds is higher than that for corporates – respectively 76% versus 8% by number of trades, and 37% vs 16% by volume. As was the case in the April 2022 corporate bond study, this report confirms that trade out times for sovereigns/public bonds are significantly longer for small issuance sizes and larger trade sizes. Trade out times vary significantly for various issue and trade size categories, ranging from a few minutes to well over a year depending on the issue and trade size category. As a result, the data supports real-time and End of Day (EOD) reporting for some categories of trades, but also shows certain deferrals for larger trades should be significantly longer than four weeks. The vast majority of trades (92%) in the combined sovereign/public bond category relate to direct sovereign issuance from Debt Management Offices (DMOs) rather than non-sovereign public entities. Sovereign trading volume is over twice the size of corporate bond trading. the report also provides trading volume from each EU issuer country. This data analysis supports AFME’s consistent position that deferral times should be calibrated by ESMA, only after analysis of actual trade data collected from the fixed income consolidated tape. – Ends –

In response to the European Commission’s report on the review of the Securitisation Regulation*, Shaun Baddeley, Managing Director of Securitisation at the Association for Financial Markets in Europe (AFME), said: “The Commission has published its much-awaited report on the functioning of the Securitisation Regulation. AFME agrees with the industry survey, conducted by the Commission, which finds that the Securitisation Regulation has not been successful in improving access to credit for the real economy. AFME accepts the Commission’s conclusion that more time is needed to truly assess the impact of the new framework but urges more action as soon as possible to help boost the securitisation market in Europe, which has been struggling for years due to regulatory imbalances. “In particular, AFME welcomesthe Commission’s invitation to ESMA to conduct a much-needed review of transaction reporting templates, noting the need to significantly simplify requirements for private transactions to make the framework relevant and proportionate. However, without change in the definition of a private securitisation, many private transactions will be treated as public for disclosure purposes, in part, defeating the purpose of the review. This will at best create real challenges for smaller borrowers reliant on bank relationships to finance themselves efficiently via private securitisation, and at worse, prevent them from accessing this funding at all. “AFME also finds the opportunity to foster EU investor growth has so far been missed. While the report acknowledges market participants' concerns that investor due diligence obligations are disproportionate, creating high barriers to entry for new investors, there is no action to address this issue. The industry awaits with interest the recommendations from the Joint ESAs report on their review of the prudential capital framework for banks and insurers, which will present another important opportunity to attract investors back to securitisation. It will also be a chance to recalibrate bank capital to address disproportionate capital treatment for both parties, when compared to other asset classes. “The report recognises the important contribution that securitisation can make in channelling capital towards the green economic transition and supports the EBA’s assessment that no separate sustainable securitisation framework is needed. AFME agrees with this assessment but would urge policy makers to recognise in the Green Bond Standard the important role that securitisation can play via green synthetic securitisation.” - ENDS -

The Association for Financial Markets in Europe (AFME) has today published a new paper “Open Finance and Data Sharing – Building Blocks for a Competitive, Innovative and Secure Framework”. This paper precedes the European Commission’s framework for data access in financial services which is due to be published in the coming months as announced by the EU’s chief of financial policy, Mairead McGuinness. Elise Soucie, Associate Director of Technology and Operations at AFME, said: “Open Finance in the EU’s data economy will transform the way banks share data with each other, and also with third-party providers, such as fintech companies. For financial services this could mean that access to new, broader data sets could enhance the way banks operate and encourage innovation across sectors. “But with innovation comes potential for unintended consequences such as sharing data with participants in other sectors who may already have a dominant share of both individual and corporate data and which could lead to monopolies and the exploitation of data. Therefore AFME has identified four key principles to help address these risks and to support policy makers in the development of a robust Open Finance Framework.” The paper identifies four key principles to support the development of a robust Open Finance Framework, including: A level playing field is crucial In order for an Open Finance Framework to flourish not only in financial services but across multiple sectors, there must be consistent and appropriate regulatory oversight. This consistency is key in order to both support innovation, but also to discourage monopolies, encourage competition and efficiency, and to lower costs for both corporate and retail customers, creating a robust and effective data economy. For this to occur, regulation must address risks consistently and market players must have consistent regulation if data is to be shared across the sectors. Interoperability and an appropriate level of standardisation A robust data economy and its positive long-term impacts will be supported by both interoperability and an appropriate level of standardisation on a global scale. Interoperability should also support a level playing field so that, if data is being shared outside the financial services sector, it is still subject to appropriate requirements and remains high quality and fit for purpose. Furthermore, any harmonisation would also need to occur across EU Member States, while also being complementary to global frameworks. This interoperability could be supported through a market-led forum that could support the implementation of both principle-based standards and technical and security standards where appropriate. An appropriate framework for compensation Compensation is important in order to ensure fair allocation of costs across the data value chain and to safeguard fair competition. Compensation, for infrastructure and provision of data services is also important to incentivise data holders to maintain a high level of quality and high functioning data sharing mechanisms. Ensuring that each type of data is supported by an appropriate data sharing infrastructure enables data to be fit for purpose and reliable when used. Data reliability also supports a robust data economy and mitigates risks to data integrity, data security, regulatory compliance and the accuracy of end products for both corporate and retail consumers. Clear liability provisions Liability provisions are important in order to provide legal clarity with respect to the access, processing, sharing, and storage of data. These provisions should be consistent with the GDPR and should also include specifications on redress and dispute resolution as well as consent mechanisms for consent beyond the usage of the data controller. In addition to the Open Finance Framework setting out liability provisions, it should also support and enable contractual agreements as these are crucial to fill any gaps in new use cases, or specialised scenarios which may require additional clarity on the legal, technical and other conditions governing data sharing. - ENDS - Note to the editor: This summer AFME responded to the European Commission’s targeted consultation on ‘Open Finance and Data Sharing in the Financial Sector’. Commissioner McGuinness’ announcement of the European Commission’s Expert Group on Open Finance builds on the European Commission’s efforts to gain cross-industry insight into the impact of data sharing.

The Association for Financial Markets in Europe (AFME) has today published a new paper discussing whether Europe should move to a one-day settlement cycle (known as T+1). In Europe, the current settlement cycle for most transactions in equities and fixed income markets is two business days (‘T+2’). The paper follows announcements by the US and other jurisdictions earlier this year of their intention to move to shorter settlement cycles. Pete Tomlinson, Director of Post Trade at AFME, said: “An industry move to T+1 would follow the historic trend towards shorter settlement cycles, and could result in reduced market risk and associated costs. However, a move to T+1 could be the most challenging migration yet because it would remove the only business day between trading and settlement, creating significant pressure on post-trade operations, particularly for global participants. The barriers to timely settlement in the current model need to be fully understood and addressed before Europe can move to T+1. A rushed or uncoordinated approach is likely to result in increased risks, costs and inefficiencies, particularly given the unique nature of European markets which have multiple different market infrastructures and legal frameworks. For this reason, AFME is calling for an industry task force to be set up to conduct a detailed assessment of the benefits, costs and challenges of T+1 adoption.” The paper, “T+1 Settlement in Europe: Potential Benefits and Challenges” highlights the key benefits of moving to a shorter settlement cycle, including: Reduction of risk: shortening the number of days between trade execution and settlement will reduce counterparty, market and credit risk, especially during periods of high market volatility. Significant reduction of associated costs: by limiting firms’ open exposures over the settlement period, there will also be a reduction in margin requirements, allowing market participants to better manage capital and liquidity risk. Maintaining global alignment: given that some major jurisdictions will be adopting T+1, the end users of capital markets may benefit from Europe following the same approach. The paper also outlines the various barriers to overcome before such a migration can take place, including: Post trade activities compressed into shorter time frame: there would be significantly fewer hours between trading and the beginning of the settlement cycle for post-trade operational processes to take place. While it might be assumed that moving from two days to one day would reduce the available post-trade processing time by 50%, AFME actually estimates market participants will be moving from having 12 hours to 2 hours of post-trade operations time, an 83% reduction. Possible increase in settlement fails: the migration could also lead to an increase in the number of settlement fails in the market, which will incur cash penalties under Central Securities Depositories Regulation (CSDR) rules, as well as having capital impacts under Basel III requirements. Greater operational complexities for global participants: time zone differences will impact the possibility of same-day matching processes for investors from outside Europe, vastly reducing the time available to communicate and resolve any breaks or exceptions. This impact would be particularly significant on cross-currency transactions which have an FX component. Securities Lending impact: moving to a T+1 settlement cycle compresses the timeline to identify and recall securities, which could lead to breaks in the process, resulting in an increase in settlement fails and cash penalties unless there is a modification to existing processes, technology and overall behavioral changes. Impact for Exchange Traded Funds (ETFs) and Securities-based derivatives more pronounced: Due to the global composition of many ETFs, which contain underlying securities from several jurisdictions, this can often lead to settlement delays in a T+2 environment, due to time zone differences, market holidays and cross-border settlement complexity. These challenges would be even more pronounced in a T+1 environment. Challenges will also exist for securities-based derivatives with further assessment required to identify impacts to the swap lifecycle, such as margining calculation and collection. AFME’s paper strongly recommends that further cross-industry discussion is required to identify and quantify the benefits and challenges of moving to T+1 settlement. AFME cautions that a successful migration will require coordinated industry effort, from an initial impact assessment through to the development of a detailed implementation plan. - ENDS -

We are deeply saddened to hear of the death of Her Majesty the Queen. We wish to extend our deepest condolences to the Royal Family for their loss on behalf of the Association for Financial Markets in Europe and its members. We are thankful for the Queen’s many years of loyal service to the United Kingdom.

The Association for Financial Markets in Europe (AFME) welcomes today’s publication of the draft report by Rapporteur Danuta Hübner, which represents an important milestone in the legislative negotiations on the Markets in Financial Instruments Regulation (MiFIR) Review. Adam Farkas, Chief Executive at AFME, said: “The MiFIR review and the proposals from Professor Hübner come at a critical moment. With Europe facing challenging times in light of slowing growth and rising inflation, in addition to the economic impact of the war in Ukraine, the efficient functioning of secondary markets is even more vital to meet Europe’s increasing private financing needs. “To ensure the continued functioning of these markets, the MiFIR Review must preserve the diversity of trading mechanisms serving different investor needs. Banks, as market makers, are an essential part of this ecosystem, committing their balance sheets to provide liquidity to financial markets. This intermediation is vital to help support market depth and liquidity throughout changing market conditions. “Therefore, we would urge the Parliament to consider key issues affecting the competitiveness of European markets. For example, proposals which impose undue restrictions or expose committed bank liquidity providers to increased risk could have potentially damaging effects on secondary market liquidity and the competitiveness of European markets. “Capital markets are global and we commend Professor Hübner’s approach of ensuring regulatory changes in other jurisdictions are taken into account in the development of the EU framework. Keeping these developments in mind will contribute to strengthening the competitiveness and efficiency of EU markets, ensuring that investors can access optimal trading conditions, which will ultimately benefit EU savers and pensioners.” “We look forward to examining the draft report in further detail and engaging with the European Parliament over the coming months.” In particular, AFME urges the Parliament to consider the following in its deliberations going forward on the MiFIR Review: In equities markets, AFME supports the suspension of the double volume cap, which will ensure EU capital markets remain competitive by bringing this part of the regulation into line with other jurisdictions. We also note that Professor Hübner has proposed an enhanced role for ESMA in establishing a size threshold for Systematic Internaliser (SI) trades that can be executed at midpoint, a minimum quoting size for SIs and a minimum size threshold for use of the reference price waiver by trading venues. AFME cautions that if these restrictions are introduced, it is vital that they are based on sound evidence relating to market quality (i.e. the efficiency of intraday and closing price formation) and the delivery of best execution outcomes for end investors. AFME believes that applying further, unnecessary restrictions to the SI regime will erode the level playing field and inhibit SIs’ efficient facilitation of trading for institutional investors.For example, we note that the EU is a global outlier in pursuing restrictions on midpoint execution. In fixed income markets, while a 4-week price and volume deferral for very large transactions is a step in the right direction, any changes to transparency thresholds and the timing of publication of trading data that have not been based off granular analysis using a comprehensive, accurate data set, risks exposing market-makers to undue risk. The fixed income transparency regime needs to be calibrated to allow these market makers (which are committed liquidity providers) to continue to be able to quote/trade in large sizes as well as in illiquid instruments. The calibration must provide sufficient time to market-makers to hedge or unwind their positions, both in a benign environment, as well as during periods of high market volatility. The level one text should set out the principles which need to be taken into account when determining these calibrations, but the calibration exercise itself, in our view, should be delegated to ESMA on the basis of a thorough impact assessment. Establishing a well-designed consolidated tape for equites and fixed income will promote more attractive and competitive capital markets in EU and contribute to reducing home country bias in the Union, where investors tend to prefer companies from their own Member State. AFME strongly supports the statement that it is essential that the equity tape contains real-time, pre-trade data. We encourage all co-legislators to be ambitious and include pre-trade data in the equities tape at the outset. 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. Similarly, a post-trade consolidated tape for bonds will provide all investors, regardless of resources or sophistication, with a comprehensive and standardised view of the European fixed income trading environment and will help attract international capital. It is, though, important to note that a bond consolidated tape will not solely address the issues of particularly high market data costs in this market. While the development of a fully-fledged consolidated tape would be a game-changer for the Capital Markets Union, its positive impact would be undermined if the other restrictions to the trading environment, highlighted above, are introduced as this will be to the detriment of investors. On the definition of SI and SI reporting requirements, it is important to reduce uncertainty when it comes to establishing who is registered as an SI and also who should take responsibility for post-trade reporting. AFME supports proposals to introduce a designated reporter regime which will eliminate uncertainty around the question of which counterparty reports a trade for the purposes of fulfilling post-trade transparency requirements. Under the current regime, whish is based on SI designation, market participants have faced unnecessary complexity which has led to duplicative reporting. The application of a qualitative definition for SIs will remove the existing, unnecessary quantitative definition which places an unnecessary burden on EU investment firms. Combined with the decoupling of the SI regime and reporting requirements, this will lead to a framework where firms only register as SIs when it is reflective of their business model. AFME supports this approach. - ENDS -

Following the publication of the UK Financial Services Bill today, Adam Farkas, Chief Executive of the Association for Financial Markets in Europe (AFME), said: “AFME welcomes today’s Financial Services and Markets Bill setting out the UK Government’s vision for the future of the financial services sector in the UK. This will deliver meaningful change and is complementary to AFME’s long standing position in support of high regulatory standards, financial stability, competitive markets, sustainable growth, appropriate levels of investor protection and responsive legislation for financial services. “AFME is pleased to see the introduction of a new secondary objective on international competitiveness and economic growth for financial services regulators. This approach will ensure high regulatory standards are maintained while also putting an appropriate level of focus on competition. “AFME also welcomes, in particular,the proposed legislative change to remove the share trading obligation (STO) and the double volume cap (DVC). These features were not conducive to supporting secondary market liquidity and their removal will help to boost the attractiveness of capital markets in the UK, making them more agile and promoting better outcomes for investors. “We also look forward to engaging with the Bank of England and Financial Conduct Authority as they build their rulebooks in light of their new powers.” - ENDS -

Following the publication today of the UK’s Secondary Capital Raising Review, the Association for Financial Markets in Europe (AFME) and UK Finance, commented: “We welcome the Secondary Capital Raising Review’s ambitious initiative to make UK markets more attractive and competitive. The recommendations are an important step in the dialogue and ongoing process towards advancing these important objectives. We will be actively and constructively involved in the discussions and consultations to come regarding the application, development and feasibility of these aspirational proposals. We particularly support the proposed changes to allow issuers to raise funds on a soft pre-emptive basis, noting that our members helped issuers raise substantial amounts of much-needed capital through placings when this was allowed in 2020.” - ENDS -