Huw Jones

LONDON (Reuters – On Thursday, the European Union presented its third wave for reforms within six years to create a seamless market in securities that is more competitive with New York and London. It will also pit stock exchanges against other platforms.

After Britain’s departure from the EU and large financial industry, the EU failed to realize its goal of creating a capital markets union.

In order to keep the project in line, the EU’s executive European Commission recommended that investors be provided with free information and a “tape”, or record, of bond and stock prices. The EU’s executive European Commission also suggested tweaks for long-term investments funds and plans to coordinate the regulation of them.

Commission wants to make money easier to raise for companies in order to reach climate goals. Brussels also has a financial rival on its doorstep after Brexit.

Mairead McGuinness, EU chief of financial services, stated that it was important to develop their own capital markets.

When CMU is fully implemented, the tape will contain securities prices as well as a single point. She stated that this would be a decisive moment.

“There are many positive factors that make development of capital markets union more likely than it would be if those forces weren’t pushing us toward sustainability,” she stated.

To become law, the proposals must be approved by the European Parliament and EU countries. There are likely to be compromises.

BVI is a German Investment Funds Association. They believe that the European Single Access Point would allow asset managers to meet their growing reporting obligations more efficiently.

BATTLE FOR THE TAPE

The proposed consolidated tape will be a source of industry lobbying for legislators and EU countries. It is intended to offer stock transaction prices in as close to “real time” as possible – at low costs or no cost to retail investors.

Exchanges demand a wait of at least 15 minutes for data to be handed over. Investment funds and banks say that tapes will not be useful if they aren’t in real-time.

Rainer Riss, Director General of the Federation of European Securities Exchangessaid that the exchanges are now faced with having to release data at no cost. Revenue will depend on how many investors sign up for the new tape.

Riess explained that “Retail investors will get nothing more than what they receive today from their broker, or Google (NASDAQ.):) for no cost.”

Association for Financial Markets in Europe (AFME) represents funds and investment banks. They believe a real-time tape is necessary for delivering CMU.

Officials in the industry claim that Brussels offered a ransom to exchanges, offering revenue sharing and a real time tape.

Thursday’s proposals would make certain off-exchange and “dark trading” more difficult. The goal is to funnel more transactions onto the bourses. According to industry officials, this might lead to more business moving to London since regulators there are less strict than before Brexit.

EU’s CMU package is being used to implement other changes such as banning payments for order flow, or where retailers brokers forward orders of clients to other traders.