French watchdog chief calls for a ban on “payment for order flow” on the EU stock market

French stock market regulators said “payment of order flows” that fueled a bout of enthusiastic retail stock trading on London-Wall Street should be banned in the European Union.

In the United States, stock brokers have promoted their business among retail customers by offering zero-fee services. Payment is made by submitting an order to a particular wholesale market maker and executing it.

The EU situation is even more complicated because there is no single market regulator, said Robert Ofere, chairman of AMF Securities Watchdog in France.

“I strongly hope to support the clarity of the ban on payment of order flows,” Ophele told an event held by the European market trade association AFME.

Now that the UK has left the block, the EU is reviewing securities market rules known as MiFID II with the aim of making a series of adjustments to deepen the capital markets.

France, the EU President in the first half of 2022, will be in charge of marshalling reforms through the block.

The EU Executive European Commission has stated that it wants to create an “integrated tape” or transaction price record of stocks traded across blocks to help investors find the best deal.

However, there is debate about whether to publish the transaction price in near real time or 15 minutes late as the exchange wants.

Ofere said the closer to real-time is better for investors.

“I don’t know if this integrated tape user’s life will be easier, even if I try to be late,” Ophele said.

EFAMA, a pan-European fund industry group, said real-time tapes are essential to increasing individual investors’ confidence in the EU’s capital markets and for asset managers to improve their trading strategies.

Ofere said he hopes that EU changes will be made by January 2023 to improve the quality of stock market data.

Banks claim that if data quality improves, calls from stock exchanges to curb off-exchange transactions or over-the-counter transactions, which are often done through banks, are considered unjustified.

Hugh Jones