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In order to address this risk, the ICMA considers that it is essential that every effort be made to sustain ongoing dialogues – both between the requisite officials and with the markets – and ICMA accordingly welcomes this current consultative process. It is in everyone’s best interests that necessary issues are adequately addressed, whilst at the same time avoiding any unnecessary adverse implications for the international capital market.
In overall terms, the ICMA considers that a recommendation to separate securities trading activity, thereby isolating it from primary market activity, would have potentially significant adverse impacts on the international capital market. Given its direct relevance to the international capital market, which is the ICMA’s specific area of competence, this response focusses specifically upon this point; and is therefore directly pertinent to question #5 of the consultation.
The ICMA believes that in a thriving and efficient capital market, primary and secondary market trading activities play symbiotic roles. A healthy flow of primary market origination helps to stimulate secondary market trading, whilst improved liquidity in secondary markets helps to underpin investor confidence and thus boost conditions for new issuers. Separation of these activities may impede this interrelationship, thus harming overall conditions for financing, whilst at the same time not in itself delivering dramatic improvements to either the safety of the system or of investors. Furthermore, these concerns cannot be dealt with simply by moving both primary and secondary market trading activities out from banks, as this would create a significant stress on underwriting capacity.
At the current time, it is apparent that, more than ever, Europe needs a thriving and efficient capital market, able to meet the challenges of funding real economy needs whilst European economies’ former dependence on funding through the channel of bank lending continues to diminish. The ICMA is convinced that this is already a major challenge for the capital markets; and is conscious that much work remains to be completed on developing a single, efficient capital market across the EU, with markets and their supporting infrastructure still significantly fractured at Member State level. All engaged in the important process of financial regulatory reform recognise the potential for the emergence of an improved financial services sector and the ICMA is striving to ensure that includes a stronger European capital market capable of performing its desired task of efficiently allocating funds to business needs. The ICMA considers that a required separation of securities trading activity would contradict the effective achievement of this highly desirable economic objective.