The Bond Market Association is urging the Forum of European Securities Commissions (Fesco) to postpone action on its proposed standards for alternative trading systems, calling instead for a lighter touch to regulation.
The Association warns that functional regulation of electronic trading systems could create disincentives to their use. Instead, the Association calls for a "lighter touch" approach to regulation, especially since most debt market activity is conducted by professional, institutional investors.
It also contends that any adopted standards should focus on the specific issues associated with market integrity, but that electronic systems do not, of themselves, give rise to new market integrity issues. Nor is it appropriate to single out electronic trading systems for additional transparency requirements, states the BMA, given that fixed income market transactions largely occur in the over-the-counter markets and are not subject to trade reporting.
The Association believes it would be inappropriate for Fesco to press forward with new proposals while the European Commission is reviewing changes to the Investment Services Directive.
Scott Rankin, Association vice president and executive director of its European office, comments: "From a cost-benefit perspective, the implementation of a Fesco ATS regulatory scheme will likely be very short-lived and impose an undue burden on both electronic trading system providers as well as on national regulators whose resources are not unlimited."
The Association adds: "In view of the seemingly different approach taken by the Commission in relation to the regulation of trading systems, Fesco's current proposals are unlikely to deliver a regime which will withstand the test of time."