More in Common Than Meets the Eye: Adapting to Changing Regulations in Both European and US Markets

As markets continue to shift, traders are looking to embrace changing regulations as an opportunity for growth and innovation. Today’s ESMA keynote address discussed the similarities between the US and European markets, showcasing hope on the horizon. Natasha Cazenave, Executive Director at European Securities and Markets Authority (ESMA), expertly lead today’s discussion with a bright outlook on very insightful topics currently at the forefront of the minds of traders.

Changing jurisdictions remains a large talking point as we arrive at a crossroads of transformation when it comes to new technology and data use. Europe is seeing massive impacts on trading as a result. This can be traced to how trading is taking place and the best steps forward to increasing visibility in times of uncertainty.

These drivers remain fixed in the mind of European and US traders alike, signifying that market priorities may be more aligned than we originally thought. Cazenave made the point that in 2023, more economies are connected than ever before and investment firms and asset managers alike are expanding across both continents. Specific policy action is therefore needed to ensure that organisations can keep up on both a regional and international level.

However, this can cause challenges as for jurisdictions to have a knock-on effect, they usually have to be tailored to specific markets to avoid confusion. This means that each market tends to be forced down slightly different paths as a result. This morning’s discussion here in Paris highlighted that for a level playing field to be achieved, greater collaboration needs to be at the forefront of traders' minds.

As Cazenave made clear, there is a long list of collaboration examples. From retail order flow finding the best outcomes between investor and client to the parallel efforts of increasing market transparency in terms of what constitutes a trading venue. The US and European markets are ultimately trying to achieve the same goals. This is crucial in the ongoing discussion of consolidated tapes (CT). The US is working towards improving the functions of existing CT which is still being discussed. This will be a strong asset for the European markets going forward.

Traders struggle to gain access to the same toolkits as their peers. Limiting the costs of market data will lead to a wide range of benefits including simplified transparency. CT, therefore, allows for more timely consolidated data and will significantly improve competition between trading venues allowing for the goal of market collaboration to become a reality.

Cazenave coined the phrase "optimism is not customary in today’s climate". However, she recommended that we take a step back and try to understand how much consolidation there is between the EU and the US. We can continue confidently down this path knowing we can trust our colleagues and count on them to take trading into the future.

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