The EFRP has issued a Position Paper on the review of the Market in Financial Instruments Directive, in view of the ECON Committee vote on the MiFID II/MiFIR. The EFRP welcomes and supports the general purpose of the MiFID review. The EFRP is concerned, however, that some of the elements in the Proposals do not take the specific needs and characteristics of IORPs investment policies into account. In their current form, some elements of the MiFID II and MiFIR Proposals could have negative consequences on the financial activities of IORPs.
EFRP is strongly supportive of increasing transparency in the markets, but would therefore warn against the commercial interests which may lie behind the application of this valuable principle in the current proposals. For example, high-frequency traders and other speculative operators could take undue advantage of investments by long-term investors such as pension funds if the current proposals are adopted. The EFRP therefore calls for a tailored legislative approach, which treats pension funds, as long-term investors, differently from other financial actors. The EFRP supports a smart application of the transparency principles, which will allow pension funds and asset management companies acting on their behalf to interact with other market participants on a fair basis. Pension funds should be allowed to comply with transparency principles and, at same time, to continue pursuing the best interest of their beneficiaries: millions of European citizens who expect their workplace pension benefits.
EFRP would like to see the MiFID II and MiFIR Proposals take this into account. It believes that a degree of flexibility in the execution of large and illiquid order is necessary to ensure appropriate risk management and minimisation of costs, from which pension fund members will benefit. In this respect, the current proposals on organised trading facilities (OTF), systemic internalisers (SI), pre- and post-trade transparency, algorithmic/high frequency trading and mandatory trading of derivatives on trading platforms places could have a negative effect on pension funds, since they apply in the same way to all financial market participants. EFRP understands that these proposals express the laudable aim of increasing transparency in financial trading, but they may:
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favour short-term orientated market participants over long-term institutional investors: high-frequency traders and other speculative operators could take undue advantage;
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offer trading venues the opportunity to take undue commercial advantage from pension funds’ investment activities. This commercial advantage would not be counterbalanced by any benefit for the trading activity of pension funds, and henceforth their members. Therefore, it would only represent an unjustified cost for pension funds, affecting the returns on investments and, ultimately, the contributions paid to workplace pension beneficiaries.
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© EFRP - European Federation for Retirement Provision
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