European Stock Exchange Shake-Up Planned

by Philip Morton, Investors Offshore.com

30 September 2002

The Financial Times reported on Thursday that the European Commission is set to allow investors to trade shares directly with other shareholders and banks, as part of a continuing effort to create a single European financial market.

Some EU member states, for example the UK and Germany, already permit banks to trade in-house. However in other countries such as France, Italy, and Spain, all major trades must go through a stock exchange.

The FT quoted an advanced draft of new EC rules, due to be officially unveiled in November, which stated that: 'National options...are fundamentally at odds with the objective of a single financial market,' and outlined proposals designed to loosen regulation on investment banks and stock exchanges, allowing them to operate across the EU once they have been approved by their national authority:

'The [national] authorisation shall be valid for the entire community and shall permit an investment firm to provide services for which it has been authorised throughout the Community,' the draft document seen by the Financial Times explained.

It is thought that the move, if approved by the European Parliament and EU governments will primarily benefit larger investment banks and stock exchanges, retail investors making cross-border transactions, and multinational companies. However, small banks and stock exchanges, investment advisers and alternative trading platforms stand to lose out under the new system.

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