EU Parliament Committee Amends Investment Services Directive

by Ulrika Lomas, for LawAndTax-News.com, Brussels

05 March 2004

The European Parliament's Economic and Monetary Affairs Committee has watered down share trading transparency proposals in the Investment Services Directive which were put in place by the European Commission.

One of the aims of the Directive is to allow banks to compete with stock exchanges for share trading business. Prior to the publication of the initial draft legislation, the EC put in place a regime obliging banks to publicly disclose bid and offer prices for shares before all trades, with the exception of large block trades.

This move was supported by European stock exchanges (and the majority of EU member states) who argued that without such disclosure, market fragmentation could mean that retail investors can no longer find the best deal. However, the banks themselves argued that full pre-trade price disclosure would be impractical, and prohibitively expensive.

Under the amendment proposed by the Economic and Monetary Affairs Committee, pre-trade transparency would be be required only for trades up to a certain market size, a measure which will be determined at a later date.

A full EU Parliament vote on the matter is expected by the end of the month.

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