The FIA European Principal Traders Association (FIA EPTA), representing Europe’s leading non-bank market makers and liquidity providers, published its new Principles on Sustainable Finance and ESG. FIA EPTA strongly believes that non-bank market makers and liquidity providers can play an important role in the transition towards a more sustainable financial ecosystem.
The new Principles reflect the commitment by FIA EPTA and its members to support the success of Sustainable Finance and ESG initiatives at all levels of the capital markets. The principles further clarify how market makers and liquidity providers can and will contribute to achieving Europe’s Sustainable Finance goals.
Successful delivery of the sustainable finance objectives requires partnerships across primary, secondary, and post-trading markets and across jurisdictions. In follow-up to the publication, FIA EPTA will continue to actively engage with public and market stakeholders to strengthen the common goal to create a more sustainable Europe. Please find a summary of the Principles below and the PDF document on the right.
FIA EPTA Principles on Sustainable Finance and ESG:
1. FIA EPTA members are committed to promoting Sustainable Finance in capital markets, working jointly with end-investors and other parts of the industry across primary, secondary, and post-trading markets.
- FIA EPTA members will work toward the development, adaptation, and endorsement of ESG products and initiatives across primary, secondary and post-trading markets. This will take place through active cooperation, formal and informal partnering with end-investors, financial intermediaries, data and index providers, trading venues, and other financial infrastructure providers and clearing firms, as well as by actively engaging with public authorities and other relevant stakeholders.
2. FIA EPTA members will strive for a healthy and transparent ecosystem of financial markets for ESG products.
- FIA EPTA members believe that secondary markets are key for the success of the green transition, in particular, to enable asset holders to effectively manage their fiduciary duty in regard to their sustainable holdings (e.g. to buy or sell ESG products on behalf of end-investors, insurance holders, or pension participants) and to enable sound financial risk management for these end-investors.
3. To advance the reorientation of capital flows towards sustainable investments, FIA EPTA members will aim (or continue, where they are already doing so) to integrate sustainable products into the suite of products for which they are providing liquidity.
- FIA EPTA members are independent providers of liquidity on all of the main European trading venues, making products more liquid, and therefore more accessible for other market participants (including end-investors), which facilitates greater diversity and broader participation in financial markets.
4. FIA EPTA members will work to improve price discovery and price formation of ESG products.
- FIA EPTA members are an important source of liquidity in listed and cleared derivatives, including ESG futures and options. By providing a tight bid-ask spread, climate change-related financial risks can be hedged with minimal cost (contributing to the enabling and mainstreaming of the management of financial risks coming from climate change).
5. As financial intermediaries facilitating efficient risk transfer between investors, FIA EPTA members are committed to facilitating the transition from non-ESG products to ESG products.
- Providing liquidity in ESG products allows long-term investors to buy or sell financial instruments at all times, without having to wait for another long-term investor looking to do the opposite. In this manner liquidity provision by principal trading firms results in lower transaction costs and less risk for end investors, creating increased price transparency and lower search costs for all market participants.
6. FIA EPTA members will establish functional internal governance and policies to support their sustainability efforts.
- FIA EPTA members will challenge themselves to identify ways within their own operations to support the establishment of a circular economy, i.e. to reduce the carbon intensity of their own operations and those of their business partners, e.g. regarding the energy use of market data centers.
