EU sees 'decisive moment' for building single capital market

EU sees 'decisive moment' for building single capital market
EU sees 'decisive moment' for building single capital market   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<div> <p>By Huw Jones</p> <p><span class="caps">LONDON</span> -The European Union set out its third wave of reforms in six years on Thursday to try to build a seamless securities market that can compete better with London and New York, a step that will pit stock exchanges against rival platforms.</p> <p>The EU project to create a capital markets union (<span class="caps">CMU</span>) suffered a blow when Britain and its large financial sector left the bloc.</p> <p>To keep the project on track, the EU’s executive European Commission proposed establishing a “tape” or record of stock and bond prices, and giving investors free information on companies. It also proposed tweaks to long-term investment funds, and plans to better coordinate how they are regulated.</p> <p>The Commission wants to make it easier to raise money for companies to meet climate goals and recover from the financial blow of the <span class="caps">COVID</span>-19 pandemic. Brexit also leaves Brussels with a financial competitor on its doorstep. </p> <p>“It’s important that we develop our own capital markets,” EU financial services chief Mairead McGuinness said.</p> <p>The tape of securities prices and single point of information will create a “decisive moment” for <span class="caps">CMU</span> when implemented, she said.</p> <p>“There are a lot of good factors pulling together to make the development of capital market union more likely than if we didn’t have those forces pushing us to sustainability,” she said.</p> <p>The proposals will need approval from the European Parliament and EU states to become law, with compromises expected.</p> <p>Markus Ferber, a German centre-right member of the European Parliament, said the proposals make modest progress but fail to match the ambition of the <span class="caps">CMU</span> project by leaving out big items like changing taxation rules.</p> <p>German investment funds association <span class="caps">BVI</span> said the proposed European Single Access Point for company information would help asset managers meet increasing reporting obligations in a more cost-effective way.</p> <p>‘<span class="caps">ELABORATE</span> <span class="caps">EXPERIMENT</span>’</p> <p>Lawmakers and EU states will face industry lobbying over the proposed consolidated tape to provide stock transaction prices as “close to real time as technically possible” – and at a low cost or free to retail investors.</p> <p>Exchanges want a 15-minute delay before the mandatory handing over of their data. Banks and investment funds say a tape will be of no use if not in real time.</p> <p>The Federation of European Securities Exchanges (<span class="caps">FESE</span>) said the <span class="caps">CMU</span> package is “one step forward, one step back” as it fails to increase the competitiveness of EU markets.</p> <p>“Exchanges remain deeply concerned by the risks of such an elaborate and complex experiment,” <span class="caps">FESE</span> director general Rainer Riess said of the proposals for a tape.</p> <p>The Association for Financial Markets in Europe (<span class="caps">AFME</span>), which represents investment banks and funds, said a real-time tape was essential for delivering <span class="caps">CMU</span>.</p> <p>Cboe, which owns pan-European exchange Cboe Europe, said the tape proposal discriminated against across-Europe platforms like itself, and lacked ambition by not including pre-trade prices.</p> <p>Thursday’s proposals make some types of off-exchange or “dark” trading harder, with the aim of funnelling more transactions onto bourses. Industry officials say this could divert business to London, where regulators are taking a more liberal approach since Brexit.</p> <p>The EU is using its <span class="caps">CMU</span> package to make other changes, such as banning payment for order flow or where retail brokers forward clients’ orders to other traders for a fee.</p> <p>(See also: <span class="caps">ANALYSIS</span>-EU adds more pieces to its ‘elusive’ capital market jigsaw)</p> </div>