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EU capital markets at a crossroads: Getting the MiFID II/MiFIR review right to unlock Europe’s growth potential
Journal of Securities Operations & Custody,
15
(4),
367-375
(2023)
Abstract
This paper explores the aims and scope of the MiFID II/MiFIR Review and its significance in unlocking Europe’s growth potential amid current socioeconomic challenges. The EU’s capital markets currently underperform globally, necessitating urgent structural reforms to enhance competitiveness and participation. The Markets in Financial Instruments Directive II (MiFID II)/ Markets in Financial Instruments Regulation (MiFIR) regime, designed to foster fair competition and investor confidence, has fallen short due to market fragmentation and regulatory inconsistencies. Addressing these issues requires transparent, resilient and integrated capital markets that prioritise liquidity, price formation and investor protection. Fragmentation in the EU equity market is a pressing concern, with off-book volumes increasing and exchanges experiencing a decline in trading flow. Enhancing transparency requirements, minimum order sizes and the dark trading cap, while simplifying waivers and deferrals, can help address these challenges. Implementing a consolidated tape (CT) to increase transparency in off-exchange trading is also crucial, with a phased-in approach recommended for reliable and high-quality data. Placing societal interests at the heart of these reforms is vital for achieving the EU’s strategic autonomy and ensuring long-term economic growth. The MiFID II/MiFIR Review presents an opportunity to promote transparency, efficiency and investor protection, garnering citizen support and contributing to critical societal challenges. Readers can expect to gain knowledge of the current state of EU capital markets, the shortcomings of the MiFID II/MiFIR regime and the necessary reforms to unlock Europe’s growth potential. They will understand the challenges posed by market fragmentation, the importance of transparency and liquidity and the role of a CT in enhancing the investment climate.
Keywords: equity trading; exchanges; financial market infrastructure
The full article is available to subscribers to the journal.
Author's Biography
Niels Brab is Head of Group Regulatory Strategy and Chief Regulatory Officer of Deutsche Börse Group (DBG). His area houses teams including government relations and political affairs, regulatory analytics, regulatory operations as well as ESG Regulation. As part of his mandate, Niels covers key regulatory and political issues across the value chain of Deutsche Börse Group, including on market data and indices, trading as well as clearing and settlement. Representing DBG in a variety of associations, such as the World Federation of Exchanges (WFE), the Federation of European Securities Exchanges (FESE) and the European Association of CCP Clearing Houses (EACH), Niels is also DBG’s representative in key public fora, including ESMA’s CCP Policy Committee and the European Commission’s Expert Group on Euroclearing. Before his appointment as Head of Group Regulatory Strategy and Chief Regulatory Officer, Niels was Head of Government Relations as well as Head of Representative Office Brussels at Deutsche Börse Group. Prior to joining Deutsche Börse Group, Niels worked at a number of consultancies, including FTI Consulting and Fleishman-Hillard, and founded his own consultancy EURObjective. Niels holds an LLM in European law and an MSc in public policy and human development from the University of Maastricht.
