Retail participation to boost European markets - AFM

A senior Dutch regulator has stressed the important role that retail investors could play in the growth of the European financial markets.

Speaking at the start of FOW Trading Amsterdam 2024, Tanya Pieters-Gorissen, the head of Capital Markets Integrity Supervision at the Netherlands Authority for the Financial Markets (AFM), said retail investment could help boost European markets.

Pieters-Gorissen told the delegation: “If we really want to raise the capital markets to a higher level, we need markets with a higher level of retail participation. On this point, the European capital markets are very much behind the capital markets in the US.”

The regulator accepted the US and Europe are different in that European pensions are largely occupational whereas in the US individuals take more responsibility for their retirement plans.

She added: “Still, we must encourage retail investors to invest more to enable them to prepare for future financial goals they have but, of course, they need to assured of the right protection.”

The regulator cited the example of Payment for Order Flow, a practice where firms are paid for routing client orders which has been outlawed in Europe though the implementation of that ban has been delayed.

Pieters-Gorissen also said regulators need to understand better “the behavioural aspects of consumer bias”.

“If we do that, that will lead to improvement of decisions of consumers and the trust they have in capital markets.”

She added: “There is an important role for financial institutions here and, in the end, if we manage to solve these challenges together, I am sure we will see more retail investors finding their way to the capital markets.”

Pieters-Gorissen continued: “This is important as increased retail participation and protection in capital markets contributes to deepening the Capital Markets Union and strengthening the European economic system.”

The head of MEFF, the Spanish derivatives market of Bolsas y Mercados Espanoles (BME), said last month its recent efforts to encourage retail participation were feeding into product innovations.