ESMA also closely cooperate and communicate with national authorities in order to avoid and mitigate cross-border differences which would generate regulatory arbitrage and the fragmentation of financial markets. Thus, said the Chair, ESMA helps to sustain the market depth of the European Single Financial Market as well as the related economies of scale and risk absorption capacities.
The Chair noted ESMA’s soon to be completed standards on derivatives central counterparties to facilitate the stability and efficiency of derivative markets. They will provide the basis for effective regulation and supervision of these very important market infrastructures. ESMA’s guidelines on high frequency trading support a smooth market process and minimize trading distortions. Also, ETF guidelines support the stability of these investment funds by having requirements for the quality of collateral, securities lending and the use of repo transactions. The Chair's remarks came at a meeting of the EU financial markets association.