In the context of its capital market union project, the European Commission has made a number of key proposals for the creation of new opportunities for businesses and investors across the single market. This has been done through innovative EU-wide products and services, simpler, clearer and more proportionate rules, as well as a more efficient supervision of the financial industry.

Comprehensive information

There is nevertheless one element still missing in the puzzle: EU legislation does not yet provide a simple mechanism through which people, especially potential investors, can access a comprehensive range of information about European companies, the securities they issue and the financial products they offer.

Investment decisions are data driven. But while EU capital markets are quite transparent, there remains room for improvement. This is mainly because information remains fragmented; data is stored in local national databases, using different infrastructure and formats. Recent consultations run by the directorate‑general for financial stability, financial services and capital markets union (DG FISMA) have identified a strong demand among investors, data aggregators, RegTech and civil society for streamlined access to information about European companies. All want easier access to a broad range of information, preferably in machine-readable format.

At the same time, standardisation and transformation of financial information into structured data is progressing. The EU made a decisive step with the recent publication of a regulation on the European single electronic format (ESEF). Starting from 2021, the consolidated financial statements of listed companies accessible to the public will be in a single format and, for some, digitally structured. This is a huge step forward in company reporting.

Work in progress

Despite this breakthrough, the digital internal market for company data remains largely a blank page. The European Electronic Access Point (EEAP) mandated by the transparency directive has not yet been implemented and doesn’t cover all information of relevance to investors and other users.

A lost opportunity? Hopefully not, as DG FISMA has been running a pilot project called the European Financial Transparency Gateway (EFTG) since 2017 to test whether distributed ledger technology (DLT) could provide a more effective solution to implement the EEAP. The project was carried out in two phases – a ‘proof of concept’ and a pilot project. The latter was completed in 2019 and allowed DG FISMA to draw a number of important conclusions. Most notably, it demonstrated that DLT is fit for the job of solving the problem of data fragmentation. The outcome of the EFTG project is promising and the benefits of building on DLT could be numerous. More importantly, the flexible nature of DLT means it could be extended to cover any type of public financial information over and beyond transparency legislation.

21^st-century ‘gold’

Data has become the new ‘gold’. Big data, machine learning and artificial intelligence will fuel the 21^st-century’s economy. Companies feeding the markets with a lot of financial or non-financial information could represent an important part of this. Private financial services providers are already showing a huge appetite for ‘consuming’ this modern commodity. Investors need better access to that information in a simple and easily comparable way.

This is a work in progress. So, stay tuned and please pencil in some time in your agendas to attend our conference, which will take place on 2 October 2019 in Brussels. Register here!

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