LONDON, November 25, Reuters - The European Union has instituted its third wave of reforms in a row over the last six years to build a seamless securities market that can compete better with London and New York, a move that will pit stock exchanges against rival platforms.
The EU's plan to create a capital markets union CMU suffered a blow when Britain and its large financial sector left the bloc.
The EU's executive European Commission proposed establishing a tape or record of stock and bond prices, and giving investors free information on companies, in order to keep the project on track. It proposed changes to long-term investment funds, and plans to better coordinate how they are regulated.
The Commission wants to make it easier to raise money for companies that meet climate goals and recover from the financial blow of the COVID-19 pandemic. It leaves Brussels with a financial competitor on its doorstep.
It's important that we develop our own capital markets, according to Mairead McGuinness, EU financial services chief.
The tape of securities prices and single point of information will be a decisive moment for the CMU when it is implemented, she said.
She said there are a lot of good factors that are working together to make the development of the capital market union more likely than if we didn't have those forces pushing us towards sustainability.
The proposals will need approval from the European Parliament and EU states to become law, with compromises expected.
German investment funds association BVI said that the proposed European Single Access Point for company information would help asset managers meet reporting obligations in a more cost-effective way.
The EU and lawmakers will have to face industry lobbying over the proposed tape to provide stock transaction prices as close to real time as technically possible, and at a low cost or free to retail investors.
The exchanges want a 15 minute delay to hand over their data. Banks and investment funds say a tape will be of no use if not in real time.
Retail investors won't get anything more than what they get from their broker or Google for free, Riess said.
A real-time tape was essential to deliver CMU, according to the Association for Financial Markets in Europe AFME, a group of investment banks and funds.
Brussels has paid ransom to exchanges by offering them revenue sharing in exchange for a real-time tape, according to industry officials.
The proposal is to make certain types of off-exchange or dark trading harder, with the aim of funnelling more transactions onto bourses. Industry officials say this could lead to a shift to London, where regulators are taking a more liberal approach since the end of Brexit.
The EU is using its CMU 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.