EU sees “decisive moments” to build a single capital market


London — The European Union launched a third wave of reforms in six years on Thursday in an attempt to build a more competitive and seamless stock market with London and New York. This is a step in which the stock exchange can compete with rival platforms.

The EU project to create the Capital Markets Union (CMU) was hit when the UK and its large financial sector left the block.

To get the project on track, the EU’s Executive European Commission has proposed to establish a “tape” or record of stock and bond prices and provide investors with free information about the company. We also propose adjustments to long-term investment funds and plan to better adjust how they are regulated.

The Commission hopes to make it easier for businesses to reach their climate goals and raise funds to recover from the financial blow of the COVID-19 pandemic. Brexit is also leaving Brussels and facing financial competitors.

“It is important for us to develop our own capital markets,” said Mairead McGuinness, head of financial services in the EU.

She said a tape of securities prices and a single point of information would create a “decisive moment” for CMU when implemented.

“There are many better factors to rally to enable the development of the Capital Markets Union than if we weren’t able to drive us to sustainability,” she said.

The proposal requires approval from the European Parliament and EU member states before it becomes legal, and a compromise is expected.

The German Investment Funds Association BVI said the European single access point proposed for company information will help asset managers meet their increasing reporting obligations in a more cost-effective manner.

Battle of tape

Parliamentarians and EU member states will face industry lobbying over the proposed integration tape and will provide equity trading prices to retail investors “technically as close to real-time as possible” at low cost or free of charge.

The exchange wants a 15 minute delay in delivering the data. Banks and mutual funds say tapes are useless unless they are in real time.

Reiner Lease, Executive Secretary of the European Stock Exchange Federation, faces the need for exchanges to make money and provide data for free, depending on the number of investors currently subscribing to the new tape. He said he was.

“Personal investors won’t get anything in addition to what they get today for free from brokers and Google,” Reese said.

The European Financial Markets Association (AFME), which represents investment banks and funds, said real-time tapes are essential to the provision of CMUs.

According to industry insiders, Brussels paid the exchange a “ransom” by offering revenue sharing in exchange for real-time tapes.

Thursday’s proposal makes certain off-exchange or “dark” transactions difficult, with the goal of concentrating more transactions on the stock exchange. Industry insiders say this could divert the business to London. In London, regulators have taken a more liberal approach since Brexit.

The EU is using the CMU package to make other changes, such as banning payment of order flows and retail brokers transferring client orders to other traders for a fee.

Hugh Jones

Reuters

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