The Irish Presidency has today reached a breakthrough among member states on new rules to make financial markets more efficient, resilient and transparent, and to strengthen the protection of investors.
The proposals for a Markets in Financial Instruments Directive and Regulation (MiFID II and MiFIR) signal a significant step forward by the EU towards enhancing transparency levels and limiting the growth of ‘dark pool’ trading in particular. Agreement was reached among member states’ Ambassadors this morning and will be presented by Minister Noonan to EU Finance Ministers for their approval at the meeting of the Ecofin Council on Friday 21 June.
Welcoming the agreement, the Minister for Finance Michael Noonan TD said:
"Reaching agreement among member states on these new rules has been an Irish Presidency programme objective."
Minister Noonan - "Strengthening financial regulation can reinforce stability and confidence in the financial system, ultimately underpinning economic growth and job creation."
"We have worked extensively with member states over the past six months in getting this agreement today, which paves the way for negotiations to begin with European Parliament on finalising the legislation."
The new framework will also increase the supervisory powers of regulators and provide clear operating rules for all trading activities, including harmonising provisions concerning the activities of investment firms, regulated markets and data service providers. These proposals are part of the G20 commitments to enhance transparency, mitigate systemic risk and protect against market abuse.
The main elements of the position taken by member states today include:
- Enhanced transparency: member states have decided to limit ‘dark pool’ trading and introduce a new trade transparency regime for non-equities markets
- More robust and efficient market structures with the introduction of a new type of trading venue, the Organised Trading Facility (OTF)
- Specific support to facilitate better access to capital markets for small- and- medium sized enterprises.
- non-discriminatory open access to trading venues and central counterparties
- new safeguards to take account of technological developments such as algorithmic trading or high speed trading
- Stronger investor protection
- New rules on corporate governance and managers' responsibility
- Enhanced framework for derivatives markets
Thirty months since publication of the Commission’s original proposal, the Council General Approach will receive its final seal of approval by the 27 member states of the Council on 21 June 2013. The agreement was reached following intensive negotiations and numerous Council Working Party meetings chaired by the Irish Presidency, and now paves the way for this file to progress to the next stage of the legislative process, which is engagement via trilogues with the European Parliament.
Notes to Editors
Explanation of 'dark pool' trading:
- Dark pool trading is where stocks are not traded on a lit order book.
- The changes made in the trading transparency requirements show that Council intends for the EU to lead the way in limiting dark pool trading.
- Council’s agreed text provides for increased transparency with a significant limitation on trading in “dark pools” as it introduces an EU wide volume cap of 8% on the amount of dark trading that can be done, and a 4% cap per trading venue.
- This will improve the price formation process and provide investors with more market information, while still allowing certain legitimate transactions to be done in the dark.