Response to IOSCO Retail Market Conduct Task Force report

FESE welcomes IOSCO’s Retail Market Conduct Task Force Report and the opportunity to provide feedback to it. We believe that retail investors need to be empowered by making investment practices simple, less costly, transparent and by taking steps to prevent conflicts of interest and ensuring their protection. Nevertheless, it is important to strike a balance between ensuring retail investors’ protection and facilitating their participation in capital markets.

FESE overall supports increased retail investor participation in the market but also acknowledges the need to monitor and scrutinise the developments around retail trading platforms’ business models. One of the hidden revenue models of brokerages less strongly covered in the report is that of payment for order flow (PFOF). FESE’s response to the report highlights a series of issues that arise from PFOF models. To address these, policymakers should consider ensuring a harmonised approach. This would also support IOSCO’s mission to protect investors, maintain fair, efficient, and transparent markets, strengthen market infrastructure and promote investor confidence in the integrity of securities markets.

When it comes to gamification, regulators should focus on providing guidance on where to draw the line between those practices that are positive and reduce barriers restricting retail investors’ access to capital markets, and those that are detrimental for their protection.

FESE believes that crypto-assets can bring a variety of benefits, such as offering new investment opportunities for (retail) investors. We support moves towards generating regulatory categorisation around crypto-assets, in particular at the EU level. A common definition of crypto-assets would enable regulators to distinguish different types of assets, while bringing benefits to (retail) investors.

Finally, retail investors should be empowered to use capital markets more for long-term cost-effective investments (specifically pensions), as investors with a long-term outlook are crucial for well-functioning capital markets. Measures could include financial incentives, such as tax breaks, or the elimination of the double taxation of dividends could be beneficial to enable long-term direct investment, as is the case for the EU.