EU reform plans to create financial markets

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EU reform plans to create financial markets

In this file picture taken October 28, 2015, the European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium. LONDON, Nov 25, Reuters - The European Union reformed 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 move that will pit stock exchanges against rival platforms.

The EU project 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 also 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 to meet climate goals and recover from the financial blow of the COVID - 19 epidemic. 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.

When implemented, the tape of securities prices and single point of information will be a decisive moment for the CMU, she said.

She said there are a lot of factors that are pulling together in order 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.

Markus Ferber, a German centre-right member of the European Parliament, said the proposals make modest progress but don't match the ambition of the CMU project by leaving out big items like changing taxation rules.

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 proposed consolidated tape will give stock transaction prices as close to real time as technically possible - and at a low cost or free to retail investors, according to industry lobbying.

Exchanges want a 15 minute delay before the mandatory handover of their data. Banks and investment funds say a tape will be of no use if not in real time.

The Federation of European Securities Exchanges said the CMU package is one step forward, one step back as it fails to increase the competitiveness of EU markets.

FESE director general Rainer Riess said that exchanges are deeply concerned by the risks of such an elaborate and complex experiment.

The Association for Financial Markets in Europe AFME, representing investment banks and funds, said real-time tape was essential for the delivery of CMU.

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.

Thursday's proposals make certain types of off-exchange or dark trading harder, with the aim of funnelling more transactions onto bourses. Industry officials say that this could divert business 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 banning retail brokers forwarding clients' orders to other traders for a fee.