Brussels rediscovers market regulation

Amid the current market turmoil, the EU Commission has a "plan to tame the markets," says French financial daily La Tribune. An "impressive legislative package, that could be called the European equivalent of the Dodd-Frank [Wall Street Reform and Consumer Protection] Act in the United States," will be presented by EU Internal Market and Services Commissioner, Michel Barnier on October 20. The tools provided in the new bill include criminalising market abuses and measures to prevent speculation on raw materials.

"Six years after having deregulated its financial markets, Europe is turning coat," notes the paper. The aim of the new bill is to respond to critics against the excessive deregulation of markets that followed the implementation, in 2007, of the Markets in Financial Instruments and Investment Services Directive (MiFID). The MiFID allowed, for example, some transactions to be carried out outside of regulated stock markets through electronic platforms operated by the banks themselves, thus escaping from European regulations.

The Commission is proposing to create a new category of trading areas - organised trading facilities (OFT) - which would have to meet transparency requirements. "But [the OFTs] will remain private infrastructures and the banks will still have discretionary power over how the operations will be carried out," La Tribune says. The proposals come two days after the European Parliament restricted naked sovereign credit default swaps [derivatives that speculate on whether a country will default on its debts]. "The United Kingdom, traditional ally of the major banks, has lost some influence," the paper says. But, it warns, "lengthy negotiations are expected" before the bill is adopted.