Consultation opens on EU market regulator reforms

The European Commission is consulting on possible reforms to the regulatory framework for investment firms and market operators which would include a single price comparison tool

The review covers the Markets in Financial Instruments Directive and Regulation (MiFID and MiFIR), which set out rules covering European securities markets.

The first section aims to gather views from all stakeholders (including non-specialists) on the experience of two years of application of the financial instruments directive. In particular, it will gather feedback on whether a targeted review of it with an ambitious timeline would be appropriate to address the most urgent shortcomings.

The second section seeks views on technical aspects of the current MiFID regime.

It will allow the Commission to assess the impact of possible changes to EU legislation on the basis of proposals already put forward from previous public consultations and studies.

These include a study on the effects of the unbundling regime on the availability and quality of research reports on SMEs, and a study on the digitalisation of the marketing and distance selling of retail financial services. This second section focuses on a number of well-defined issues.

The third section invites stakeholders to highlight any further regulatory aspects or identified issues not mentioned in the first and second sections.

The consultation includes consideration of the absence of consolidated tape, which is a system for providing centralised price and market data, and whether one should be included under the MiFID framework.

The Commission has set out detailed questions considering general features of the consolidated tape, its scope and other issues under the financial instrument directive regime with a link to the market data system.

Kay Swinburne, vice chair of financial services KPMG, welcomed the Commission’s intention to review specific parts of MiFID, including establishing a consolidated tape, but warned that it may prove hard to limit the changes.

‘Without the UK at the table, points relating to non-discriminatory access could be at risk, such as open access on trading venues and Central Counterparties. The UK argued for open and competitive access but some other member states were not in favour.

‘In my opinion, the high cost of post-trade services in the EU, which are ultimately borne by the end investor, will not go down if competition is not facilitated by enabling choice.

‘The Commission’s review of whether the consumer protection rules are fit-for-purpose, especially as they relate to professional investors, is also welcome. It is clear that the many disclosures aimed at retail clients are not needed by professional managers.

‘Further, reopening the debate on commodities and the position limit regime will no doubt be as political as ever and will generate huge involvement from non-financial services parties. Balancing these vested interests will be difficult.

‘The UK will be keeping a keen eye on how Markets in Financial Instruments Directive and Regulation evolves and will need to consider carefully whether it implements any of the proposed changes.

‘When it was being negotiated, the UK sought to ensure that the views of other key regulators, like the US Securities and Exchange Commission, were considered. The UK will wish to continue to take into account the global perspective in its own rule-making,’ Swinburne said.

The consultation closes on 20 April.

Public consultation on the review of the Markets in Financial Instruments Directive and Regulation regulatory framework

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