Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-12-13-Speech-1-236"
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"en.20101213.22.1-236"2
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"Mr President, I have difficulty explaining to those uninitiated in financial jargon precisely what my report on ‘dark pools’ refers to. The report formally refers to the trading of financial instruments, including dark pools, which are financial transactions and shares conducted without pre-trade transparency, otherwise referred to as non-displayed trades. The report, more broadly, is an assessment of the implementation of the Markets in the Financial Instruments Directive (MiFID) of 2007 with respect to equities and seeks to address structural issues currently apparent in the equities markets.
Despite this being a highly technical report, I am encouraged by the high level of debate that has occurred in the committee. I am glad that the hard work of my colleagues has managed to establish a broad base of support across political groups, turning 194 amendments into 26 compromises, which most groups were able to sign up to.
Given the timing of this own-initiative report and its culmination in a plenary vote this week, I also believe that the European Parliament has added significantly to the Commission’s recently released consultation on the MiFID II review (MiFID II), which takes into account many of the issues raised in deliberations in the committee. The European Parliament, through this report, has asked for a number of investigations into the different trading venues that are currently regulated under MiFID and seeks a closer analysis to ensure that venues providing equivalent services are regulated to an equivalent level.
I believe that the Commission, in their consultation document, may have gone a step further in widening its definition of organised trading facilities to include all venues that bring together buyers and sellers. This means a significant loophole may be closed. Yet this solution ensures that proportionality can be maintained in allowing for significant differentiation within the categories for regulated markets, MTFs, SIs, BCNs and derivative platforms.
The new level of scrutiny being suggested for operators of dark pools should be welcomed by investors as, while they currently provide protection from the wider market, they at least have the potential for abuse. Allowing regulators full access to business models should ensure that they can continue as a venue for the discretionary crossing of client orders without allowing them to expand to proportions that will affect price discovery or to provide a cover for market abuse.
As well as this, in terms of MiFID waivers, the European Parliament and the Commission agree that these need to be redefined and their implementation needs to be standardised across the EU. The possibility currently to arbitrage across EU Member States to find the best interpretation of the same rule should no longer be a possibility. During the compilation of this report and its amendment, it was clear that the biggest deficit in MiFID implementation has been the lack of a market version of a European consolidated tape. Investors in the US cannot understand how we in the EU operate without such a tool. There has been general industry acceptance, particularly among investor groups, of its necessity but, for the three years since MiFID implementation, the market participants have failed to come together to provide a European consolidated tape. Like the Commission, the Committee on Economic and Monetary Affairs is reticent to go beyond mandating the approved publication arrangements, but if a market solution is not found, then legislation should be supported.
The micro-structural issues currently affecting the equity markets have been a topic of heated debate in committee. There has been agreement that practices like flash orders, spoofing and pinging are unfair or even abusive. However, the committee found it much harder to come to agreement on the role of certain market participants, in particular, the benefits or not of high-frequency trading strategies. In the absence of clear data, it is difficult to draw any solid conclusions on their role – positive or negative – and so, before we propose legislative actions, we need to make sure that we have data so that we do not impose legislation that may be detrimental to the effective functioning of European markets.
Fundamentally, we must ensure the integrity of our financial markets. They are not there for intermediaries or the interlopers to interact with one another. They are there to provide a market place for investors to channel capital to businesses and corporates who act in our real economy. This fundamental function of the markets must be kept centre stage in all of our minds as we go through the legislative process of MiFID II."@en1
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