The World Federation of Exchanges (“WFE”) has responded to the European Commission’s Public Consultation on the Operations of the European Supervisory Authorities (ESAs).
While the consultation has an EU focus, there are some items that are relevant to the WFE’s international membership, therefore its response focuses on three key areas:
The international aspects of the ESA’s work: Whilst important for the ESAs to remain comfortable that third countries continue to satisfy standards of equivalence on an ongoing basis, this should be in the context of deference or mutual recognition principles underpinned by strong communication and information sharing arrangements. Extending the ESA’s powers in the way described would encourage the use of those powers in a way that may be extra-territorial in nature, adding complexity and ambiguity for market stakeholders, undermine the principles of deference and trust between regulators, and risk fragmenting markets.
Access to data: Given there already exist practices set out in international guidance, and/or specific cooperation arrangements between jurisdictions to facilitate the exchange of relevant information, we consider Authorities should consider carefully whether duplication of such requirements would be proportionate to the costs to the market of doing so.
Direct supervisory powers in post-trading infrastructure: The WFE and its members do not support extending ESMA’s powers to non-EU post-trading market infrastructures, and contend this would introduce risk and remove the benefits of close local supervision. We continue to support mutual recognition arrangements between jurisdictions. These should be based on common standards, use an outcomes-based approach to recognising the framework in foreign jurisdictions, and rely on regulatory deference thereafter.
