EU securities regulator warns it would ‘struggle’ to run live trading databases

Europe’s securities regulator has warned it would “struggle” if it were forced to run the live databases of trading information at the heart of a plan to rejuvenate the region’s capital markets.

Verena Ross, chair of the European Securities and Markets Authority, told the Financial Times she has warned policymakers against relying on the Paris-based organisation because it lacks the money and skills to run the ambitious project.

Brussels wants to build a set of real-time databases, known as consolidated tapes, that bundle together basic trading information on stocks and bonds from the bloc’s competing venues. It is part of a broader package of reforms, known as Mifir, which may be agreed by legislators next year.

Policymakers hope they will stimulate greater participation in Europe’s stocks and bond markets, and unleash a new wave of capital because investors would have more transparency on prices for their deals.

At present the European market is highly fragmented, giving investors plenty of choice but little ability to keep track of trading activity and make comparisons.

The legislation envisages using private companies to operate the system but has tasked Esma to be the administrator if no company emerges.

“That is something which we have cautioned against,” Ross told the FT in an interview at Esma’s Paris headquarters. “We obviously understand that the co-legislators might want to have a fallback position if no one comes forward but I think we certainly would struggle with the technical capabilities and the resources to be able to do something.”

Previous efforts to create a consolidated tape for equities in Europe have foundered because private companies could not make a profit.

Ross acknowledged that Esma would be given funding to help but said there would still be challenges because “this is a completely different skill set to what we as a regulator . . . are normally doing”.

Esma has struggled in the past with the demands created by markets legislation from Brussels. Europe’s flagship markets legislation was delayed for a year, to 2018, after the regulator said its IT systems would not be ready in time. It was also forced to delay implementation of some rules because it had not received data from the market.

Esma, along with other regulators, is also facing a difficult recruitment environment, as the war for talent with key technical skills pushes up salaries in the private sector, while spiralling inflation drives wage demands.

Its staff are employed by the EU, and its salaries are set centrally, so it has “limited ability” to be responsive to market conditions around pay.

“There is a question of how long it will take, and what will be in there,” Ross said. “Either there will be a fallback position or not, we will need to see.”