Mathijs Giltjes and Arnoud Pijls critical about information inequality on European stock market

On 23 November 2020, Financieele Dagblad (FD) published a report about Euronext, the company that also includes the AEX. The European stock exchange company was discredited by providing information to certain traders involved in buying or selling stocks and futures earlier than the rest of the traders. According to Mathijs Giltjes, PhD candidate at Erasmus School of Law, and Arnoud Pijls, assistant professor of Corporate Law and Financial Law at Erasmus School of Law, Euronext is violating European legislation. In the FD article, they respond to the information disparity between traders.

Euronext's trading system, Optiq, gives traders who are involved in buying and selling on the stock exchange via a ‘private feed’ earlier access to information about stocks and futures compared to outsiders. According to EU law, the company is allowed to offer traders a faster connection (collocation) for a fee. However, Giltjes emphasizes that there is a duty of care on Euronext in this regard. This duty of care requires, among other things, far-reaching transparency by Euronext. Because Euronext has not previously announced that the traders who enter into a transaction have a faster information flow, Giltjes doubts whether the company is complying with the rules. He thinks it is remarkable that users of the same collocation service are treated unequally.

Pijls wonders whether the differences in information speed in Optiq are in conflict with the prohibition on insider dealing. Giltjes and Pijls believe that there is no public information as referred to in the anti-market abuse legislation. Apart from the buying and selling party, the rest of the market does not receive the order information until significantly later. The current situation could, therefore, conflict with the trade ban.

 

More information

You can read the entire article by FD (in dutch) here.

About the authors
Mathijs Giltjes conducts doctoral research into flash traders and market abuse at Erasmus School of Law. Arnoud Pijls wrote his dissertation on damage assessment in case of liability for misleading stock market reports.