French watchdog chief calls for ban on ‘payment for order flow’ in EU stock market

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LONDON (Businesshala) – “Pay for order flow,” a practice critics say bouts of frenzied retail stock trading on Wall Street should be banned in the European Union, France’s stock market regulator said on Thursday.

FILE PHOTO: European Union flags fly outside the European Union Commission headquarters in Brussels, Belgium May 5, 2021. Businesshala/Yves Hermann/File photo

In the United States, stockbrokers have touted trading among retail clients by offering zero-commission services, in which payment comes from sending orders to a specific wholesale market maker for execution.

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Robert Ofel, president of France’s AMF securities watchdog, said the situation in the EU was further complicated by the lack of a single market regulator.

“I am in favor of the clarity of the restriction for payment of order flows,” Ofel said at an event organized by European market industry body AFME.

The European Union is reviewing its securities market rules, known as MiFID II, in a series of changes to deepen its capital markets now after Britain left the bloc.

France, the president of the European Union in the first half of 2022, will be responsible for reforms through the bloc.

The EU’s executive European Commission has said it wants to create a “consolidated tape” or record of transaction prices for shares traded across the bloc to make it easier for investors to find the best deals.

But there is debate as to whether trading prices should be published closer to real time or, as exchanges wish, with a 15-minute delay to nL8N2R04BU.

Ofel said the more real-time the better for investors.

“If you say let’s delay, I’m not sure it will make life any easier for the users of this syncopated tape,” Ophell said.

Pan-European funds industry body EFAMA said a real-time tape was necessary to increase retail investor confidence in EU capital markets and for asset managers to improve their trading strategies.

Ofel said he expects changes to the EU to improve the quality of stock market data could come by January 2023.

Banks argue that once data quality has improved, it would be seen as unfair to curb exchange-to-exchange trading – or the over-the-counter behavior often carried through by banks.

Reporting by Who Jones Editing by Alex Richardson and Mark Potter

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