News
BackAfter it became apparent that that the Markets in Financial Instruments Directive (MiFID), which came into force in 2007, threw the doors wide open for the creation of even more intransparent trading platforms, thereby enabling the speculation with commodity derivatives on a scale never seen before, the Commission has finally agreed to introduce a new Directive and Regulation in respect of the MiFID in order to bring more transparency and regulation to all existing trading platforms for financial products. In addition, a Market Abuse Directive (MAD) is to provide for more severe criminal sanctions against financial jugglers. This is to be guaranteed by stronger rights of intervention to be granted to the European Securities and Markets Authority (ESMA) and the national supervisors. However, the extent of such sanctions remains at the discretion of the Member States. Austria belongs to the group of countries that according to the Commission do not have any regulation against market manipulation.
New trading platforms will be regulated alongside traditional stock exchanges
Financial instruments, which until recently have only been traded on new or so far unregulated trading venues, here above all financial products that are traded off-market (so-called “over the counter” transactions), will be subject to common rules in future. More transparency is to guarantee investor protection. However, this realisation comes rather late as the deregulation of the financial markets, in contrast to the expectations of the Commission, has not resulted in more competition and lower prices. On the contrary, financial market alchemists have invented even more intransparent and complex financial products, which have hindered competition and resulted in more speculation and price fluctuations.
Commission wants to promote fair competition and transparency
In order to promote competition and transparency, all trading venues within the EU will be subject to the same regulations in future. The Commission regards the new proposals on the Markets in Financial Instruments Directive (MiFID) and the Market Abuse Directive (MAD) as an overall package. The legal cover of all trading platforms and allegedly almost all financial instruments by the MiFID shall, accompanied by criminal sanctions by the MAD, lead to greater legal certainty and thereby to better functioning financial markets. In future, the common regulations do not only apply to traditional stock exchanges and so-called Multilateral Trading Facilities (MTFs), but also to a new category of trading platforms, which are also called Organized Trading Facilities (OTFs). So far, the latter have not been subject to any regulation and have led to further destabilisation and degeneration of the financial markets.
High-frequency trading will not be abolished
In future, the MiFID is to apply a brake to technological innovations such as high-frequency trading with financial products in order to put an end to extreme price fluctuations. That means that high-frequency traders have to have sufficient liquidity. In future, the regulations on high-frequency trading too will cover all participants: on the one hand the traders themselves (investment companies and programme, which generate algorithms that determine prices and order quantities automatically without human agency); on the other hand trading platforms, which also must conform to licensing regulations. The Market Abuse Directive will also prevent traders from placing trading orders without trading intentions - a colossal example for market manipulation. The MiFID also includes a limit on positions (purchase or sales obligations of a market participant in respect of a financial instrument) in order to prevent excessive risks and extreme price volatilities. In future, market participants from third countries will also be obliged to fulfil specific conditions to be able to operate in the EU trading venues, which will increase the transparency in the markets.
All in all, the Commission continues to follow the markets and is now trying to regulate all sorts of financial products and trading venues.
Further information:
New rules for more efficient, resilient and transparent financial markets in Europe
European Commission seeks criminal sanctions for insider dealing and market manipulation to improve deterrence and market integrity
Financial instruments, which until recently have only been traded on new or so far unregulated trading venues, here above all financial products that are traded off-market (so-called “over the counter” transactions), will be subject to common rules in future. More transparency is to guarantee investor protection. However, this realisation comes rather late as the deregulation of the financial markets, in contrast to the expectations of the Commission, has not resulted in more competition and lower prices. On the contrary, financial market alchemists have invented even more intransparent and complex financial products, which have hindered competition and resulted in more speculation and price fluctuations.
Commission wants to promote fair competition and transparency
In order to promote competition and transparency, all trading venues within the EU will be subject to the same regulations in future. The Commission regards the new proposals on the Markets in Financial Instruments Directive (MiFID) and the Market Abuse Directive (MAD) as an overall package. The legal cover of all trading platforms and allegedly almost all financial instruments by the MiFID shall, accompanied by criminal sanctions by the MAD, lead to greater legal certainty and thereby to better functioning financial markets. In future, the common regulations do not only apply to traditional stock exchanges and so-called Multilateral Trading Facilities (MTFs), but also to a new category of trading platforms, which are also called Organized Trading Facilities (OTFs). So far, the latter have not been subject to any regulation and have led to further destabilisation and degeneration of the financial markets.
High-frequency trading will not be abolished
In future, the MiFID is to apply a brake to technological innovations such as high-frequency trading with financial products in order to put an end to extreme price fluctuations. That means that high-frequency traders have to have sufficient liquidity. In future, the regulations on high-frequency trading too will cover all participants: on the one hand the traders themselves (investment companies and programme, which generate algorithms that determine prices and order quantities automatically without human agency); on the other hand trading platforms, which also must conform to licensing regulations. The Market Abuse Directive will also prevent traders from placing trading orders without trading intentions - a colossal example for market manipulation. The MiFID also includes a limit on positions (purchase or sales obligations of a market participant in respect of a financial instrument) in order to prevent excessive risks and extreme price volatilities. In future, market participants from third countries will also be obliged to fulfil specific conditions to be able to operate in the EU trading venues, which will increase the transparency in the markets.
All in all, the Commission continues to follow the markets and is now trying to regulate all sorts of financial products and trading venues.
Further information:
New rules for more efficient, resilient and transparent financial markets in Europe
European Commission seeks criminal sanctions for insider dealing and market manipulation to improve deterrence and market integrity