Comprehensive rules to govern financial markets were agreed informally by negotiators for the European Parliament and the Council of Ministers earlier this week.
The rules are designed to close the loopholes in the existing legislation, ensuring that financial markets are safer as well as more efficient, investors are better protected, speculative commodity trading is curbed and high-frequency trading is regulated.
They will apply to investment firms, market operators and services providing post-trade transparency information in the EU. They are set out in two pieces of legislation: a directly applicable Regulation dealing with transparency and access to trading venues and a Directive governing authorisation and organisation of trading venues and investor protection.
According to the European Parliament, the new rules would provide that:
- all systems enabling market players to buy and sell financial instruments would have to operate as Regulated Markets (RMs) like stock exchanges, Multilateral Trading Facilities (MTFs) such as NYSE EURONEXT or Organised Trading Facilities (OTFs) designed to make sure that all trading venues are captured by the Market in Financial Instruments Directive (MiFID). Trading on OTFs would be restricted to non-equities, such as interests in bonds, structured finance products, emission allowances or derivatives.
- the trading obligations would ensure that investment firms do their trades in shares on organised trading venues such as RMs or MTFs. Transactions in derivatives subject to this obligation would have to be concluded on RMs, MTFs, or OTFs.
- firms providing investment services would have a duty to act in clients’ best interests and this would also include designing investment products for specified groups of clients according to their needs, withdrawing “toxic” products from trading and ensuring that any marketing information is clearly identifiable as such and not misleading.
For the first time it would be provided that the competent authorities would be empowered to limit the size of a net position that a person may hold in commodity derivatives, given their potential impact on food and energy prices. Under the new rules, positions in commodity derivatives (traded on trading venues and over the counter), would be limited, to support orderly pricing and prevent market distorting positions and market abuse.
The proposals also include, for the first time at EU level, rules on algorithmic trading in financial instruments.
The details of the deal will be now fine-tuned in technical meetings.
Contact Lewis Nedas’ Criminal Lawyers in London
If you, or your organisation, would be affected by these new rules and you require specialist legal advice, please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.
This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.
