The European Commission has proposed a radical rethink of the rules that govern trading in securities in the 27 member states of the European Union. The Markets in Financial Instruments Directive, known as MiFID, came into force in 2007. That's ages ago, the commission seems to be saying. "In recent years, financial markets have changed enormously. New trading venues and products have come onto the scene and technological developments such as high frequency trading have altered the landscape," it noted. The lessons of the financial crisis have to be taken into account as well, and it wants to close the loophole that have seen derivatives trading on "organised trading facilities" originally intended for the underlying instruments only. Small and medium-sized companies need better access to equity capital markets. High frequency trading needs to be better regulated, and "dark pools" will get greater sunlight through increased transparency.
A new framework: The upshot is a plan of action that will no doubt get the lobbying industry whirring at full speed. The commissions said: "These proposals consist of a Directive and a Regulation and aim to make financial markets more efficient, resilient and transparent, and to strengthen the protection of investors." And a bit of interpretation is needed here for clarity: a directive gives national government discretion over how to word the new laws; a regulation doesn't. The commission said the new framework would also increase the supervisory powers of regulators and "provide clear operating rules for all trading activities". Other global financial centres were undertaking similar discussions, it noted. But that won't stop the industry from seeking out opportunities for regulatory arbitrage.
Source document: The news release has details and a link to frequently asked questions.
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