Brussels, 18/06/2013 (Agence Europe) - On Monday 17 June, member states' ambassadors to the EU (Coreper) approved the political agreement in principle on revising the MiFID directive (2004/39/EC) which frames financial instruments markets (see EUROPE 10866). This agreement will be confirmed at Friday's Ecofin Council meeting and paves the way for the launch of negotiations with the European Parliament.
In a press release, Irish Finance Minister Michael Noolan stated: “We have worked extensively with member states over the past six months in getting this agreement today, which paves the way for negotiations to begin with European Parliament on finalising the legislation”. The Council has managed to achieve a common position without any public ministerial debate taking place. A source close to the matter spoke of the prospect of the 2014 European elections creating “a sense of urgency (at the Council) to reach an agreement in the current term”.
On Monday, the United Kingdom succeeded in getting a clause inserted that prevents any decision taken by a regulator or the European Securities and Markets Authority (ESMA) from disadvantaging a member state as an investment service provider in any given currency.
Increased transparency. The amendments brought to the text under Irish Presidency bears witness to the desire of the Council that the EU should be a leader in restricting in trading in “dark pools”. Liquidity “dark pools” are alternative platforms subject to little regulation that allow the anonymous trade in significant volumes of orders, without any transparency on the prices of the deals before operations are finalised. In an effort to increase transparency, the trading on dark pools will be limited to 8% of the total amount traded and 4% per different kinds of platform. The Irish Presidency indicated that this was a compromise when asked about the level of ceiling agreed on. A new transparency regime has also been introduced for the bonds market, structured products and derivatives, whilst taking into account the impact of rules on sovereign debt markets.
The revised directive will include the setting up of Organised Trading Facilities (OTFs) and new categories of trading platforms. These OTFs will be subject to the same transparency rules as the other trading platforms. London has managed to ensure that OTFs will be allowed to process shares, a measure that was criticised by France and one which the EP did not include in the “Ferber Report” (see EUROPE 10719).
Access should not be subject to discrimination. The Council introduced provisions to guarantee that all risk is taken into consideration before access is authorised. The Commission will also be called on to provide an assessment of the value of setting an additional deadline on access to standard derivative products.
HFT. It should be noted that the Council did not introduce a minimum period for retaining orders. The EP was keen to reduce the impact of High-Frequency Trading (HFT) on market volatility and is therefore insisting that market agents that account for 40% of financial deals in Europe retain their orders for at least half a second.
The text also includes the possibility of setting out position limits on raw material markets. A reporting requirement is also introduced on raw material derivatives positions for each category of trader, in an effort to enable regulators to analyse the role of speculation on these markets. (MB/transl.fl)