In response to the Commission’s proposal today to make targeted amendments to the Capital Requirements Regulation (CRR) to provide temporary relief to banks in the context of the Covid-19 crisis, Michael Lever, Head of Prudential Regulation at AFME, said: “The banking industry has a key role to play alongside and in partnership with governments in helping to mitigate the negative economic consequences arising from Covid-19. It is therefore essential that banks are equipped to fulfil this role so that funding quickly gets where it is needed and markets continue to function without major disruption. “We strongly support the measures contained in today’s fast-track proposal, which should help towards achieving this goal and should be concluded as rapidly as possible. However, more needs to be done to mitigate the impact of Covid-19 on businesses and the economy. “In particular, some assessments of the capacity that has been freed up may be overestimated because they do not consider the reality of market pressures, or the full range of prudential constraints banks have to respect. It is therefore important that co-legislators now consider further targeted and time limited changes to the framework. These are likely to be needed to assist borrowers, markets and the economy. In particular, full capital relief for Covid-related state guarantees must be provided across all metrics of the framework and further, strictly temporary, exclusions from the leverage ratio exposure measure may well be necessary. “Co-legislators should also not forget the impact of the additional bank lending on MREL requirements. Finally, small changes to market risk regulations are needed to ensure EU supervisors have the flexibility allowed under the current Basel Agreement. “Many of these proposed changes have already been adopted by other jurisdictions in recognition of the benefits that they bring through enhancing the capacity of their banks to support their customers and market functioning through this crisis. Europe should not delay in following suit.” -ENDS-

AFME has today published new research on the initial impact of COVID-19 on Europe’s capital markets. The report analyses the recent trends during the current abnormal market circumstances. Julio Suarez, Director of Research at AFME, said: “Overall, while prices and spreads have shifted considerably, European capital markets have continued to operate well following the outbreak of COVID-19, with liquidity ranging from very good to mixed, depending on the sector. In fact, there have been record volumes of new issuance in certain sectors. Our data also shows that banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure.” Key findings: Issuance of investment grade corporate bonds surpassed EUR 50bn in the first week of April; this amount was also the highest weekly amount ever issued in Europe. French companies have been particularly active in this respect. This is remarkable, given that many, if not most, financial market participants are working remotely. Non-financial corporates have also rapidly increased secondary equity offerings in an effort to raise cash buffers and withstand business closure for several weeks. Markets are more volatile than a few months ago, which has made it costly for some companies to list through IPOs. IPO issuance on European exchanges has declined 83% compared to a year ago. Markets have been playing their role in providing liquidity and price formation, contributing to capital allocation and helping investors manage their portfolios. Equity trading has surged 94% year on year in March-20, corporate bond trading increased 31% year on year, and FX trading rose 61% year on year in March-20. The rapid increase in securities trading and post-trade activity has been carried out without any major disruption from a business continuity perspective. Securitisation secondary markets have suffered disproportionate reductions in liquidity due to central bank support which is more limited in scope and slower and more difficult to access than for other fixed income sectors. Banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure. The report also summarises AFME’s approach to COVID-19 and the areas AFME have been focusing on to ensure that markets remain well-functioning and liquid in light of the recent impact of the coronavirus. -ENDS-

In response to the announcement by the Pre-Emption Group (PEG) today, Gary Simmons, Managing Director of High Yield and Equity Capital Markets, said: “The recent social and economic restrictions placed on businesses to stop the spread of the COVID-19 virus has had a significant impact on UK businesses and markets. AFME’s Equity Capital Markets group therefore welcomes today’s statement by the Pre-Emption Group to temporarily relax the guidelines relating to pre-emption in issuances by companies of up to 20% of their issued share capital during this period of unprecedented market turbulence. This follows an initial suggestion by AFME’s Equity Capital Markets group to the Pre-Emption Group to take a pragmatic and flexible approach regarding the fact that certain companies will likely need to raise capital very quickly, and within limited marketing windows. AFME recommends that its members follow the guidance in the PEG statement, given that the announcement is consistent with the objectives of the AFME ECM Board.” -ENDS-

Responding to the EBA’s statement on the application of the prudential framework regarding Default, Forbearance and IFRS9 in light of COVID19 measures, Michael Lever, Head of Prudential Regulation at AFME, said: “The EBA’s statement brings helpful clarifications on how banks should approach provisioning requirements in cases where customers have received forbearance in respect of their obligations under public or private moratoria. The EBA’s guidance on appropriate measures concerning the protection of consumers and the orderly function of payments services across the EU is also welcome as is the delayed timetable for open consultations and public hearings. “However, it would also be helpful to receive advice on how firms are expected to deal with the procyclicality effect on the prudent valuations of assets and clarification of the EBA’s timetable regarding its internal model repair programme. “This proactive approach by the EBA in providing useful clarifications on a number of important practical matters will help banks to confidently and speedily provide the relief their customers need. It will also ensure that valuable operational resources are not unnecessarily diverted away from meeting this key objective.” -ENDS-

Following announcements by EU and UK regulators today granting regulatory flexibility in response to the COVID-19 pandemic, Adam Farkas, Chief Executive of AFME, said: “In light of the unprecedented COVID-19 situation across Europe, banks are currently focusing on managing business continuity issues and are rightly prioritising the need to provide liquidity and manage market risks. “We therefore welcome the regulatory flexibility shown by ESMA and the FCA today in response to the imminent implementation of the tick size regime. Implementing major systems changes across multiple firms’ trading technology infrastructure at a time of heightened market volatility would introduce unnecessary operational risk, so we very much welcome the prompt action shown today.” -ENDS-

Responding to the ECB’s measures providing temporary capital and operational relief in reaction to Coronavirus, Michael Lever, Head of Prudential Regulation at AFME, said: “These are a sensible series of measures which will ensure European banks can continue to support their customers in these challenging times. Banks hold capital buffers for contingencies such as the major disruption to economic activity that we are now experiencing as a result of Coronavirus and it is entirely appropriate that the ECB Banking Supervisionguides banks to utilise them. “Bringing forward the changes in how banks are to finance their Pillar 2 requirements is also a helpful move as is the ECB’s suggestion to national macroprudential authorities to relax countercyclical buffers appropriately. We have also noted the Single Supervisor’s pragmatic approach towards the management of its other interactions with supervised banks which is also welcome.” -ENDS-

The Association for Financial Markets in Europe (AFME) has today published recommendations for partial settlement in view of the impending Central Securities Depository Regulation (CSDR). The recommendations aim to encourage greater and more harmonised use of partial settlement across the industry as a way of improving settlement rates. This is against the backdrop of CSDR, which is due to come into force in September 2020* and will introduce penalties for trades that fail to settle. Therefore, any measures to improve settlement rates will help to lessen these negative impacts to firms of CSDR. Stephen Burton, Managing Director, Post Trade at AFME, said: “The increased adoption of partial settlement is one example of how the industry can improve settlement efficiency. Particularly, at a time when the mandatory buy-in regime under CSDR is due to be implemented later this year, improving settlement rates will help to mitigate the possible negative impacts, including reduced liquidity and greater volatility, when investing in European securities.” The market practice document is aimed at all market participants including buy-side clients, brokers and service providers such as intermediaries, central counterparties, custodians, banks and local agents. The set of recommendations fall under the following three areas: Partial Hold and Release Auto-Partial Settlement Manual Partials ​The full recommendations can be downloaded here. -ENDS- Notes to Editors *Correct as of time of publication, however a draft Delegated Act is under consideration by the European Commission to delay to February 1st, 2021

Following the publication of the draft interim report of the High-Level Forum on Capital Markets Union today, Michael Cole-Fontayn, Chairman of AFME, said: “The High-Level Forum’s interim report highlights the ongoing challenges holding back the completion of the Capital Markets Union. We all agree that CMU must unleash the power of the Single Market through competition and more efficient market infrastructure.” “It is vital that the final version includes ambitious recommendations for the next phase of CMU. EU and national authorities must continue to work together towards fulfilling the CMU’s potential to achieve stronger and more integrated capital markets in the EU.” -ENDS-

The fundamental function of a trading venue is to match buyers and sellers of securities at a price that balances supply and demand through transparent rules and processes. The sale of market data is a related but separate by-product of that primary function. Over the last few decades trading venues and in particular, incumbent exchanges have greatly evolved in response to market forces and technological and regulatory deve​lopments. The privatization of exchanges and market participants’ implementation of best execution or fiduciary duty obligations has given exchanges significant market power with respect to market data that is unique to their trading venue. Globally, exchanges utilize their market power with the consequence of limiting market data access, data distribution and competition. The negative effects of increased market data costs are widely recognized, including by supervisory authorities. ** Despite some attempts to solve the problems, market data costs have continued to increase. Increasing market data costs have forced many data users to scale back their data purchase to a minimum, and sometimes economically sub-optimal, level, deselecting certain types of securities or markets – especially smaller companies and smaller, foreign markets. Both in the EU and globally, this results in reduced transparency, decreased levels of cross-border competition, lower market integration, less informed markets, higher costs for investors and potential higher cost of capital. In short, the high market data costs distort the development of efficient capital markets, which harms companies and investors and ultimately the real economy. In view of the above, we recommend that: • the MiFIDII and MiFIR requirements and the relevant delegated regulations are properly enforced, and the necessary framework is put in place to enable enforcement.*** • pricing lists published by trading venues become easily comparable. We propose that the fee schedules provided by the trading venues are harmonized and simplified. • market data agreements are drastically simplified and are valid long enough (at least one year) in order for data users to avoid having to deploy unnecessary resources. • audit procedures are simplified and harmonized. • high level definitions (information/market data, derived data/other original created work, display use/ non-display use, etc.) are harmonized. • the role of data vendors should be given a higher level of regulatory attention. • principles on the pricing of market data costs****, definitions and policies should be developed at a global level, preferably by IOSCO • additional steps be taken in case the above measures do not prove sufficient within a reasonable period of time. Concurrently, it should be assessed whether competition authorities rather than financial supervisory authorities would be better suited for ensuring that market data is charged on “reasonable commercial basis”.

Traders in the investment management and banking industries have today formally called for market trading hours to be reduced by 90-minutes to seven hours. Responding to the London Stock Exchange’s (LSE) consultation on the issue, the Association for Financial Markets in Europe (AFME) and the Investment Association (IA) are continuing their campaign for a reduction in market trading hours to either 09:00-16:00 or 09:30-16:30 GMT (10.00-17.00 or 10.30-17.30 CET). A reduction of 90 minutes in European markets would create more efficient markets, benefiting savers and investors. In Europe, there is currently a significant drive to trade in the last 2.5 hours of the day with trades costing up to 3 times more in the last 30 minutes of the day (when liquidity levels are higher) than in the first 30 minutes of the day. A shorter trading day will mean trades will be more evenly distributed, creating more effective markets and reducing costs for investors. For comparison, the US market has shorter trading hours, but 6 times the turnover, with an overall much lower cost of trading across the day, demonstrating greater stability in liquidity conditions across the whole trading day. AFME and the IA would also support a 12-month pilot across all major European exchanges and trading venues in order to test market structure benefits and impacts. April Day, Managing Director, Head of Equities at AFME, said: “This consultation is a hugely positive step forward in the debate on market trading hours. We hope that the responses from the market will provide useful feedback, particularly for other exchanges in Europe currently reviewing whether to consult their own members. For a change to happen, there has to be coordination between the exchanges across Europe. “We believe that a shorter trading day will improve liquidity in Europe as, rather than being thinly spread over an extended period of time, trades will be more evenly distributed over a shorter trading day. This will create more effective markets, reducing trading costs for market participants and investors. Adjusting market hours is also a first step towards further improving culture and diversity in our industry.” Galina Dimitrova, Director of Capital Markets at the IA, said: “It’s high time we end the long hours culture, which is detrimental to diversity and mental health, and inefficient for the markets. The London Stock Exchange now has the opportunity to lead the way. We will be looking for exchanges across Europe to follow suit and engage with their members to explore next steps, as the case for shorter market hours is clear.” The current long hours culture impacts on traders’ mental health and wellbeing. It has also been identified as a key obstacle in recruiting and retaining more diverse talent. It is hoped the proposed shortened day could also have an impact on workplace culture by improving work-life balance, and providing a necessary step towards creating more diverse and inclusive trading floors. A number of other organisations, concerned about the impact on diversity and mental health, have rallied behind the proposed cut in trading hours: Rachel Suff, well-being adviser for the CIPD, the professional body for HR and people development, said: “It’s really positive to see organisations coming together to challenge the ’norms’ of working practices and the impact they have on people and productivity. Even a small shift in working hours stands to have a positive impact on employee well-being, particularly for those who are trying to juggle working and family life.” Faye McGuinness, Head of Workplace Wellbeing Programmes at Mind, said: “We welcome the reduction in working hours for the financial sector, which we hope will give employees an extra 90 minutes per day to focus on their lives outside work. Commonly cited causes of stress and poor mental health at work include long working hours, excessive workload and poor relationships with managers or other co-workers. “Reducing contracted hours is a step in the right direction, but there’s more to be done. We want every employer to create a culture where staff can speak openly about, and receive support for, their mental health if they need it. Increasingly, employers are recognising the need to offer greater flexibility with their hours, generous annual leave and regular catch up with managers. Even relatively small things, like free fruit and subsidised exercise classes, can have a real benefit. Employers can access resources to help promote wellbeing through the Mental Health at Work Commitment.” Louisa Symington-Mills, Founder and CEO of Cityparents Ltd, the home of professional networks for City workers and inclusive workplaces, comments: “Our members tell us that the long working days which are typical of City businesses have a negative impact on mental wellbeing and work life balance, especially when coupled with the demands of family life. With dual career couples increasingly common, home responsibilities are more equally shared between parents and the traditional working day often jars with family needs. We are supportive of a reduction of trading hours, which would accelerate progress in the adjustment of City working cultures to modern life and we look forward to the outcome of the consultation.” To read the full response, please click here