Key Takeaways
- • MFA submitted formal recommendations to ESMA calling for preservation of diverse execution methods (CLOBs, closing auctions, batch auctions, systematic internalisers) to maintain competition and investor outcomes in EU equity markets.
- • Rising market data costs present a structural barrier to liquidity access; MFA argues the existing "reasonable commercial basis" standard has failed to prevent escalating pricing that disadvantages investors and reduces market efficiency.
- • Restricting execution choice without clear evidence of market harm would increase costs, reduce innovation, and weaken capital market efficiency—contrary to broader EU market strengthening objectives.
- • MFA advocates for implementation of a comprehensive consolidated tape and market data pricing reform aligned with actual production and distribution costs to improve price discovery and transparency across EU equity markets.
- • Recent diversification in EU equity trading execution methods reflects healthy competitive dynamics rather than market deterioration, according to MFA's assessment.
Summary
The Managed Funds Association (MFA) has formally urged the European Securities and Markets Authority (ESMA) to preserve execution flexibility and address escalating market data costs as core priorities in the regulator's ongoing review of EU equity market structure. The intervention comes in response to ESMA's formal call for evidence on EU equity market conditions and regulatory adequacy.
MFA's submission argues that restricting the diversity of execution methods available to investment managers would harm capital market efficiency without clear evidence of market dysfunction. Current execution pathways—including central limit order books, closing auctions, frequent batch auctions, and systematic internalisers—enable managers to pursue best execution obligations tailored to specific trading strategies and client mandates. According to Jillien Flores, MFA Chief Advocacy Officer, recent shifts in execution method usage reflect healthy competitive dynamics: "Strong equity markets require reasonably priced market data and flexibility to choose execution tools that help managers deliver the best outcomes for investors. Restricting execution choice without clear evidence of harm would be a step backward for EU equity markets, raising costs, reducing innovation, and weakening efficiency."
A secondary concern in MFA's submission targets market data pricing. The organization contends that current regulatory standards permitting pricing on a "reasonable commercial basis" have proven insufficient to constrain cost escalation. Rising expenses for market data, connectivity, and licensing create friction in the liquidity discovery process, fragmenting investor access across EU equity markets and degrading price transparency. MFA recommends that ESMA mandate implementation of a comprehensive consolidated tape coupled with market data pricing benchmarked to actual production and distribution costs.
The timing of MFA's intervention reflects broader regulatory scrutiny of EU equity market competitiveness relative to other global trading centers. The association frames its recommendations as essential to strengthening rather than constraining EU capital markets, emphasizing that reform should prioritize innovation, cost efficiency, and investor protection over prescriptive restrictions on execution methodology.
MFA's submission argues that restricting the diversity of execution methods available to investment managers would harm capital market efficiency without clear evidence of market dysfunction. Current execution pathways—including central limit order books, closing auctions, frequent batch auctions, and systematic internalisers—enable managers to pursue best execution obligations tailored to specific trading strategies and client mandates. According to Jillien Flores, MFA Chief Advocacy Officer, recent shifts in execution method usage reflect healthy competitive dynamics: "Strong equity markets require reasonably priced market data and flexibility to choose execution tools that help managers deliver the best outcomes for investors. Restricting execution choice without clear evidence of harm would be a step backward for EU equity markets, raising costs, reducing innovation, and weakening efficiency."
A secondary concern in MFA's submission targets market data pricing. The organization contends that current regulatory standards permitting pricing on a "reasonable commercial basis" have proven insufficient to constrain cost escalation. Rising expenses for market data, connectivity, and licensing create friction in the liquidity discovery process, fragmenting investor access across EU equity markets and degrading price transparency. MFA recommends that ESMA mandate implementation of a comprehensive consolidated tape coupled with market data pricing benchmarked to actual production and distribution costs.
The timing of MFA's intervention reflects broader regulatory scrutiny of EU equity market competitiveness relative to other global trading centers. The association frames its recommendations as essential to strengthening rather than constraining EU capital markets, emphasizing that reform should prioritize innovation, cost efficiency, and investor protection over prescriptive restrictions on execution methodology.
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