Verena Ross, executive director of the European Securities and Markets Authority (ESMA), said Tuesday that despite “unprecedented market reaction to the virus and government closings,” overall EU trading structures worked well during the COVID-19 crisis.
In a question-and-answer session at the IDX-Virtual Conference with FIA President and CEO Walt Lukken, Ross also said clearing “came under pressure” during the pandemic. On the funds side, redemptions were a concern, but were “partly alleviated by public-sector actions,” she said.
“A lot of funds were struggling to respond while (employees were) working at home” during the COVID-19 crisis, Ross said, and they needed more time to respond to regulatory measures. In response, ESMA prolonged the period allowed for some consultations, “giving market participants a bit more time to get greater clarity,” she said.
Ross said ESMA reprioritized its activities for 2020 following an assessment of the EU markets’ responses to COVID-19. ESMA also is working on a more common interpretation of National Competent Authorities’ supervision and enforcement rules. NCAs represent individual member states of the EU.
Asked by Lukken about a temporary short-selling ban in European equities imposed in March 2020 in an effort to control volatility during the initial wave of the COVID-19 crisis, Ross said ESMA was sharing data and information with the NCAs about the effects of the measure. Their impact on market liquidity “is an ongoing debate,” Ross said.
The short-selling bans were opposed by the FIA and the FIA European Principal Traders Association.
While the bans have been lifted, ESMA position reporting requirements remain. On June 10, ESMA renewed its decision to temporarily require holders of net short positions in shares traded on a European Union regulated market to notify relevant NCAs if the position exceeds 0.1 percent.
Ross noted that while the global markets staged a recovery in April, volatility remains. “It has been a very slow recovery compared to what had been expected,” Ross said, and potential risks from a second wave of the virus remain.