European Banks vs. the E6: Why the Industry Says Regulators Have No Evidence of Market Harm

Key caveat based on sources: The Reuters headline and AFME's position are clearly documented. However, the full text of the June 30, 2026 Reuters article was not fully retrieved in the available sources. The industry's position is well-supported by primary AFME documents and a separate report from Global Banking and Finance , but the exact wording of the bank-led push and which specific institutions were most vocal comes from secondary coverage.

The Specific Target: Systematic Internalisers (SIs)

The proposed regulatory interventions focus on Systematic Internalisers (SIs) — banks and trading firms that execute client orders off-exchange, on a bilateral basis, rather than on a public exchange.

What the E6 wants

The E6 joint position, published in May 2026, calls for a "level playing field" between trading venues and banks acting as SIs, implying tighter restrictions and more transparency for off-exchange trading . The E6 also advocates for phasing in centralized supervision under ESMA for major market infrastructures .

How AFME and the banks are pushing back

SIs are not trading venues. This is the industry's most fundamental objection. AFME argues that banks acting as SIs are not operating multilateral trading systems like exchanges. They execute trades bilaterally with clients, providing immediacy and certainty for large block trades that would move the market if executed on a lit exchange . Treating them the same as venues, AFME says, is a "false premise" .

Preventing regulatory overreach. The industry warns that tightening SI rules would force order flow back onto lit exchanges, reducing flexibility for institutional investors who depend on off-exchange execution to minimize market impact .

Timing and cumulative burden. Firms are still implementing changes from the most recent MiFIR/MiFID II review. AFME argues that launching yet another reform now would be premature and burdensome . The German lobby register document explicitly calls it "counter-productive and fundamentally misaligned with the simplification objective" .

Pushback Against the E6 Agenda

The E6 — Germany, France, Italy, Spain, the Netherlands, and Poland — issued their joint position in May 2026, calling for a phased transfer of supervisory powers to ESMA and increased equity market transparency . The Irish Times reported that the move faced resistance from smaller states like Ireland and Luxembourg .

Key pushback arguments

• Challenging the "level playing field" premise. AFME's paper directly rebuts the E6's call, arguing that SIs serve a distinct and legitimate function .

• Competitiveness concerns. Senior bank figures have questioned whether new rules are warranted at a time when the EU is trying to expand capital markets. Societe Generale Chairman Lorenzo Bini Smaghi called the new trading book standards (FRTB) "penalizing" and questioned whether they make sense for Europe .

• Risk of overregulation. A French fund manager, BDL Capital Management, stated that EU market regulation is "driving us into a wall," arguing it favors passive U.S. investment giants over active European managers .

The Regulatory Context

These arguments are playing out against a broader regulatory backdrop:

• ESMA's Call for Evidence (April 2026) explicitly acknowledges concerns about "a marked increase in dark trading, a corresponding decrease in lit continuous trading and a rise in bilateral trading arrangements such as those involving Systematic Internalisers" . This is the very trend the banks say is not harmful.

• The European Commission in June 2026 adopted a delegated act amending the Fundamental Review of the Trading Book (FRTB) — a separate but related prudential rule for banks' market risk . This shows the broader regulatory squeeze banks face.

• The ECB has separately voiced support for the Commission's proposals to deepen capital market integration, including removing barriers to cross-border trading .

Where the Debate Stands

The industry's position is supported by primary sources like AFME's position paper and lobby register documents. The regulatory perspective is well-documented in ESMA's call for evidence and the E6 joint statement. The key unresolved question remains the one the banks are asking: where is the evidence of harm?

ESMA's call for evidence, which closed on June 30, 2026, will provide a feedback statement in the second half of 2026 . That statement may either vindicate the industry's argument that the market is functioning well or provide the data regulators say they need to justify intervention.

Summary of key arguments by source: