Response to ESMA call for evidence on pre-hedging

FESE welcomes the opportunity to contribute to ESMA’s call for evidence on pre-hedging, given the importance of clarifying and delineating this market practice. FESE is convinced of the value of developing a concise definition, covering what is considered permissible in relation to pre-hedging while differentiating it from (illegitimate) ‘front running’.

In addition, pre-hedging should be regulated in a system and technology-agnostic manner. Therefore, not only request for quote (RFQ) systems should be covered, but also other scenarios - such as in over-the-counter (OTC) negotiations, systematic internalisers (SIs), etc. – where a market participant also discloses its buying/selling interest in a financial instrument to others. Taking this into account when regulating pre-hedging is crucial for a level playing field.