OpenLobby.EU
Explore

Baden-Württembergische Wertpapierbörse

Börse Stuttgart

Founded in 1860 and situated right at the heart of Stuttgart, Boerse Stuttgart stands at the forefront of Stuttgart's development as a financial centre.

Lobbying Activity

Response to Retail Investment Package

30 May 2022

Boerse Stuttgart Group fully shares the EU Commission’s object to empower retail investors. Investment should be made simple, less costly, transparent, and take steps to prevent conflicts of interest. In order to incentivise retail investor participation and financial planning, simple and cost efficient products must be easily available across the EU. Retail investors should have access to a wide range of financial instruments, from simple instruments like stocks, ETFs and bonds to rather sophisticated instruments frequently used for portfolio hedging purposes and certain trading strategies. Although we welcome the increase in retail investor participation during the last two years, we would like to highlight two barriers retail investors continue to face: One barrier relates to the amount of information retail investors receive. Many retail investors complain about an overload of information. Too many documents, some of which are difficult to understand, quickly overwhelm retail investors and deter them from investing. Legislators should instead ensure that information is bundled and the most important information is made available in an easy and comprehendible way. Another instrument for avoiding information overload is the categorisation of investors. We believe that the current investor categorisation is too narrow. The client category “retail clients” comprises a broad spectrum of investors who have very different degrees of knowledge, experience, financial resources and needs. For some of them a regulatory classification as “professional client” would be more appropriate. Currently, such clients only very rarely meet the requirements to be classified as professional client “on request” since the qualification criteria are too restricted. Thus, we advise that the hurdles to be qualified as professional investor should be adjusted. Another important barrier for retail investors relates to the availability of certain products. One striking example is the (non-)tradability of corporate bonds. For instance, the PRIIPs Regulation restricts retail investors’ access to classic, easily comprehendible corporate bonds. The PRIIPs Regulation requires the preparation of a “Key Information Document (KID)” before financial instruments classified as packaged product can be marketed to retail investors. However, many issuers are reluctant to prepare an onerous KID so that those instruments classified as PRIIPs cannot be traded by retail investors. In this context, we strongly agree with the Commission’s statement in recital 4 of the so-called “MiFID II Quick Fix” that has been implemented in February 2021 where “bonds with no other embedded derivative than a make-whole clause are generally considered safe and simple products that are eligible for retail clients.” Furthermore, in their proposed changes to the PRIIPs KID, the European Supervisory Authorities (ESAs) recommend to the Commission that “the review of the PRIIPs Regulation is used to specify that the inclusion of such [make-whole] clauses per se should not result in a bond falling into the scope of PRIIPs.” Boerse Stuttgart Group strongly supports this statement and calls on the EU Commission to implement the recommendations of the ESAs. However, additionally regulators should extend this assessment to include also bonds with a simple standard call and bonds carrying a standard call plus a make-whole clause, because each of them are equal simple and easily comprehendible. Finally, we would like to make a general remark. We believe that retail investors should be offered a fair, transparent, and efficient market structure in the EU. The safe harbour nature of regulated markets, which offer a transparent and robust price formation process, brings value to all market participants. Thus, we call on legislators to promote lit markets and support their transparent price formation process.
Read full response

Response to Retail Investment Strategy

18 May 2021

As an exchange that caters the needs for retail investors, Börse Stuttgart strongly supports the initiative by the EU Commission to look closely on retail investors participation in financial markets. We welcome the opportunity to participate in the Commission’s consultation on the EU strategy for retail investors roadmap. During the COVID-19 pandemic, many new retail investors discovered the benefits of capital markets. Digital Innovation proved its power: through new forms of App-based brokerage and various social media channels, capital markets have become easier accessible than ever before. Although these developments are to be welcomed, some aspects raise concerns. The risks associated with a “gamification” of trading, especially among rather unexperienced investors on capital markets, were recently addressed by policy makers and regulators, e.g. former ESMA Chair Steven Maijoor. Furthermore, while Börse Stuttgart supports the recent increase in capital market participation, we also want to point to existing barriers. One striking example is the (non-)tradability of corporate bonds. They are still not tradable for the majority of retail investors – despite the recent repeal of the requirement of a target market determination for bonds with a make-whole clause within the MiFID II Quick Fix. In this context, we strongly agree with the Commission’s statement in recital 4 of the respective legislation that “bonds with no other embedded derivative than a make-whole clause are generally considered safe and simple products that are eligible for retail clients”. However, crucial impediments for retail investors remain. Many corporate bonds are classified as packaged retail investment products within the PRIIPs regulation and may have a minimum denomination of 100.000 EUR, making them not tradable for most retail investors. Further amendments of the PRIIP regulation are urgently needed. Another area where we see politics to have a responsibility for improvements, is financial literacy. Political initiatives should help to ensure that every citizen is able to close existing literacy gaps. Only those who know and can properly assess risks are capable of acting confidently on capital markets. Politics should help to reduce prejudices against investments in securities. Börse Stuttgart supports the aim of action number 7 in the New CMU Action Plan to develop an EU financial competence framework. We strongly encourage the Commission to initiate and accelerate further activities. In the roadmap, a stronger differentiation between investor categories is considered. In this area we see it necessary beside facilitating access to certain products (see above) to ease the regulatory requirements for semi-professionals. The regulatory burden and the information requirements for retail investors have to be reduced. We see limited benefit in handing retail investors an overload of documents that may lead to more confusion than clarification. Concerning inducements, we would like to point out two important issues. One is the practice of “payment for order flow” (PFOF). We are highly concerned that this practice seems to remain common, especially among “Neo-Brokers”, despite being contrary to MiFID II rules. Recent incidents around "GameStop" have proven PFOF-related conflicts of interest and concerns about retail investor protection impressively. It even went so far that trading in some shares was temporarily suspended on certain brokerage Apps to the detriment of retail investors. Hence, we call for a systematic impact study by regulators and, on this basis, clarifying further regulatory guidance. The other issue relates to the advice provided by intermediaries to customers. We support that banks should continue to receive inducements in return for advisory services. A ban on inducements would lead to a situation where the majority of investors can no longer afford any investment advice because the cost for fee-based advice would be too high.
Read full response

Meeting with John Berrigan (Director-General Financial Stability, Financial Services and Capital Markets Union) and NRW.BANK

10 Nov 2020 · Sustainable Finance and the implementation of Basel III

Response to Action Plan on the Capital Markets Union

4 Aug 2020

Börse Stuttgart welcomes the Capital Markets Union (CMU) Roadmap and deems the completion of a true and meaningful CMU very important. Against the background of the current Covid-19 crisis, we are convinced that capital markets can play an essential role in the post-pandemic economic recovery. The current crisis has shown that at times of high uncertainty market participants appreciate the safe, transparent and price forming environment of regulated markets. In particular transparency contributes to financial stability, integrity and fairness, which is one of the assets of transparent trading on regulated markets compared to trading taking place in the dark and off-venue. In the current crisis, financial infrastructures have performed well and demonstrated their resilience. Equity is an important aspect in order to buffer exogenous shocks. The need for more equity to support the CMU and as a response to the current crisis shows that transparent trading must be preserved and strengthened. MiFID II/MiFIR has not achieved to strengthen fair, transparent, efficient and integrated markets. In contrast, e.g. different rules on pre- and post-trade transparency requirements for regulated markets and bilateral execution venues (SIs and OTC), led to an un-level playing field. Regulated markets face significant disadvantages due to more stringent requirements, which is reflected in an increase in dark trading (SI and OTC) and a decrease in lit trading resulting in less transparent markets. Börse Stuttgart believes that market structure improvements are a prerequisite for a successful CMU. It needs to become less complex and build on lessons learned from MiFID II to truly support lit trading. Therefore, SI trading should be restricted to above LIS only. This would be an efficient way to incentivize lit trading and ensure the quality and robustness of the price formation process. Börse Stuttgart is also convinced that a ConsolidatedTape (CT) will not solve the current market structure issues in the EU and thus rejects the idea of establishing a CT. A tape of record may be a viable alternative that presents a more cost-effective solution, avoids latency issues and delivers clear value to the market and investors. Equally important is the overall objective of the CMU to strengthen the regulatory framework in order to better protect retail investors and to rebuild trust in financial markets after the financial crisis. It was closely connected to the political will to encourage retail investors to engage again in capital markets. However, provisions designed to improve investor protection had the opposite effects. Instead of making it easier for retail investors to participate in capital markets new barriers emerged. Retail investors being excluded from trading simple and easy comprehendible corporate bonds due to issues around the KID, target market and denomination requirements or the current tick size regime leading to larger spreads and thus increased costs for retail investors to trade third country shares are two illustrative examples of significant barriers that still exist. In conclusion, the debate moving forward should focus on: - Delivering on end-investor needs: as markets are becoming more complexto navigate, it is time to go back to a simpler and more transparent market structure. - The overall public interest of ensuring an efficient price formation process underpinned by the resilience lit markets have demonstrated in the recent crisis. When reviewing MiFID II and as an integral part of the CMU, policymakers and regulators should enable a market structure that caters to: - A simplification of market models that supports active price formation and the generation of robust reference prices. - More inclusive markets, facilitating and encouraging direct access for pan-European, national and local banks. - An enhanced offer to investors (big or small, retail or institutional) of better ways of interacting with transparent markets.
Read full response