9 Financial services: financial instruments
| (a)
(33277)
15938/11
COM(11) 652
(b)
(33278)
15939/11
+ ADDs 1-2
COM(11) 656
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Draft Regulation on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories
Draft Directive on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council
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| Legal base | (a) Article 114 TFEU; co-decision; QMV
(b) Article 53(1) TFEU; co-decision; QMV
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| Documents originated | 20 October 2011
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| Deposited in Parliament | 27 October 2011
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| Department | HM Treasury
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| Basis of consideration | EM of 24 November 2011
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| Previous Committee Report | None
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| Discussion in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
9.1 The Markets in Financial Instruments[57]
Directive (MiFID) came into force in November 2007, replacing
the Investment Services Directive. A core pillar of EU financial
markets integration, the MiFID consists of a framework Directive
(Directive 2004/39/EC), an implementing Directive (Directive 2006/73/EC)
and an implementing Regulation (Regulation No 1287/2006), the
latter two made by the Commission. The MiFID sets the legal framework
and conduct of business requirements that apply to firms providing
investment services (such as brokerage, advice, dealing, portfolio
management and underwriting) in financial instruments and the
conditions governing the operation of trading venues such as regulated
markets. It establishes the powers and duties of national competent
authorities in relation to the regulation of these activities
and includes rules to protect investors.
9.2 A key change introduced by the MiFID was to abolish
the 'concentration rule' under which Member States could require
all trading in financial instruments to take place on regulated
markets. This has promoted the creation of an integrated EU-wide
financial market with new venues such as multilateral trading
facilities (MFTs) providing competition to traditional exchanges.
Overall, transaction costs are generally held to have decreased.
Investors have benefited from greater choice in terms of service
providers and products. However, increased market fragmentation
and the rapid pace of change in trading structures and strategies,
driven in part by the MiFID itself and in part by technological
developments such as the growth of computer-based trading, and
the international regulatory response to the financial crisis,
including G20 commitments to improve transparency in derivatives
markets, have been used by the Commission to justify an extensive
review of the MiFID.
The documents
9.3 The Commission proposes replacing the existing
framework Directive (Directive 2004/39/EC) with a Regulation and
a Directive. The draft Directive, document (b) would amend specific
requirements regarding the provision of investment services, the
scope of exemptions from the current Directive, organisational
and conduct of business requirements for investment firms, organisational
requirements for trading venues, the authorisation and ongoing
obligations applicable to providers of data services, powers available
to competent authorities, sanctions and rules applicable to third-country
firms operating via a branch.
9.4 The draft Regulation, document (a), would set
out requirements in relation to the disclosure of trade transparency
data to the public and transaction data to competent authorities,
removing barriers to non-discriminatory access to clearing facilities,
the mandatory trading of derivatives on organised venues, specific
supervisory actions regarding financial instruments and positions
in derivatives and the provision of services by third-country
firms without a branch.
MAIN CHANGES TO BE INTRODUCED BY THE PROPOSED LEGISLATION
New category of trading facility
9.5 Saying that a central aim of the proposal is
to ensure that all organised trading is conducted on regulated
trading venues, the Commission proposes, in addition to the existing
categories of regulated markets and MTFs, introduction of a new
category, known as Organised Trading Facilities (OTFs). The definition
of OTF would extend to any system or facility, which is not a
regulated market or MTF, operated by an investment firm or a market
operator, in which multiple third-party buying or selling interests
in financial instruments were able to interact in the system in
a way that resulted in a contract. The same pre- and post-trade
transparency requirements would apply to all the venues. Regulated
markets are currently required to have non-discriminatory rules
governing access and non-discretionary rules for execution of
orders. Neither requirement would apply to OTFs, giving them additional
flexibility to provide a differentiated offering to users of their
systems. However, with the aim of maintaining operator neutrality,
the Commission proposes that operators of an OTF would have to
ensure that they have arrangements preventing the execution of
client orders in an OTF against the proprietary capital of the
operator (Article 20 of the Directive).
Pre-trade transparency
9.6 Articles 3 and 4 of the Regulation would govern
pre-trade transparency rules for equities. The requirements would
apply to shares, depositary receipts, exchange traded funds, certificates
and other similar financial instruments which are traded on an
MTF or an OTF. It is clear that the same requirements are also
intended to apply to these instruments when admitted to trading
or traded on a regulated market. All regulated venues would have
to make public the current bid and offer prices and the depth
of trading interest at those prices for these instruments. This
would apply to actionable indications of interest as well as traditional
bids and offers.
9.7 The ability for national competent authorities
to waive the obligation for pre-trade transparency, for example,
for large-in-scale orders, which currently exists under the MiFID
would be retained. However, the procedure for waiving the obligation
would be changed and waivers that had previously been agreed would
be reviewed by the European Securities and Markets Authority within
two years following the date of application of the Regulation.
Competent authorities would also be required to inform the authority
and other competent authorities about their intention to grant
new waivers and the authority would have to issue an opinion to
the authority as to whether the waiver was compatible with the
Commission's measures that would specify the type of orders or
market models that should qualify for a waiver.
9.8 Pre-trade transparency for non-equities is addressed
in Articles 7 and 8 of the draft Regulation. This regime would
extend equity-like pre-trade transparency, which applies in the
MiFID currently, to non-equity markets, specifically bonds and
structured products admitted to trading on a regulated market
or for which a prospectus has been published, emission allowances
and derivatives admitted to trading or which are traded on an
MTF or OTF. The same arrangements also would apply for granting
waivers.
Systematic Internalisers
9.9 Systematic Internalisers (SIs) are investment
firms which, on an organised, frequent and systematic basis, deal
on own account by executing client orders outside regulated markets,
MTFs, or the new category of OTFs. SIs in equities are required
to make public their quotes on a regular and continuous basis.
9.10 Articles 17 and 18 of the draft Regulation would
extend the obligation to publish firm quotes for those non-equity
products to which pre-trade transparency requirements have been
applied. These are "bonds and structured products admitted
to trading on a regulated market or for which a prospectus has
been published, emission allowances and derivatives which are
clearing eligible or are admitted to trading on a regulated market
or are traded on an MTF or OTF" (although a sub-set of derivatives
would not be permitted to trade through systematic internalisation).
9.11 Where a systematic internaliser was asked for
a quote relating to these financial instruments and agreed to
provide one, it would have to be a firm quote. The quote would
have also to be made available to other clients of the investment
firm in an objective and non-discriminatory way on the basis of
the firm's commercial policy. Firms would have to undertake to
enter into transaction with the clients to whom these quotes were
made available if the quoted size was below a size specific to
the instrument (that would be determined by the Commission through
delegated acts). However, the firm would be able to establish
non-discretionary limits to the number of transactions they would
enter into pursuant to that undertaking. Further quotes that were
at or below the instrument specific size would have to be made
public to market participants other than clients of the investment
firm.
Trading obligation for derivatives
9.12 The G20 has agreed that trading in standardised
derivatives should move to exchanges or electronic trading platforms
where appropriate. Article 24 of the draft Regulation would set
out a requirement for transactions in derivatives that had been
declared subject to the trading obligation to be concluded only
on regulated markets, MTFs, OTFs or certain third country venues.
Determination of which derivatives should be subject to the trading
obligation would fall to the European Securities and Markets Authority.
The authority would have to consider that classes of derivatives
were "sufficiently liquid" pursuant to three criteria
— the average frequency of trades, the average size of trades
and the number and type of active market participants. It would
have to conduct a public consultation before submitting draft
implementing technical standards to the Commission.
Algorithmic trading
9.13 Article 17 of the draft Directive would require
firms that engage in algorithmic trading to have effective systems
and risk controls in place including business continuity plans.
Algorithmic trading strategies would also be required to be in
continuous operation during trading hours of venues being utilised
and to post firm quotes at competitive prices with the result
of providing liquidity on a regular and ongoing basis.
Third country access
9.14 The current MiFID does not provide for harmonised
rules governing access of third country firms, instead leaving
it to Member State discretion, provided that such firms are not
accorded more favourable treatment than EU firms. Article 41 of
the draft Directive would introduce new rules regarding the establishment
of branches by third country firms and Article 36 of the draft
Regulation would introduce new requirements for the provision
of services without a branch by third country firms.
9.15 For the provision of investment services or
activities to retail clients a branch in the EU would be a requirement.
Competent authorities in Member States would not be able to authorise
branches of third country firms until the Commission had made
a determination about the home jurisdiction of the third country
firm, to the effect that it provided equivalence to the requirements
set out in the MiFID and the Capital Adequacy Directive. Furthermore,
the third country would have to provide for equivalent reciprocal
recognition of the prudential framework applicable to investment
firms authorised under the MiFID.
9.16 Third country firms providing cross-border services
without a branch would be required to register with the European
Securities and Markets Authority. Provision of services on this
basis would be limited to eligible counterparties in the EU. Before
the authority could register a third country firm, the home jurisdiction
of that firm would have to have been deemed equivalent and reciprocal
by the Commission in the same way that would apply to branches.
9.17 Firms authorised under the branch provisions
would be able to passport their services within the EU. An exemption
from the new regime would be provided where services were received
from the third country firm at the own exclusive initiative of
a person in the EU. Transitional provisions for existing firms,
under which existing national regimes would continue to apply,
would last for four years from the entry into force of the Directive
and the Regulation.
Regulation of commodities derivatives markets
9.18 Article 59 of the draft Directive would introduce
rules on the regulation of commodity derivatives markets to support
liquidity, prevent market abuse and orderly functioning. It would
give the Commission the power, although not the obligation, to
specify, via delegated acts, up-front limits (that is position
limits), or 'alternative arrangements with equivalent effect such
as position management with automatic review thresholds', on the
number of commodity contracts which any person could hold. Competent
authorities would also be required to ensure that regulated markets,
MTFs and OTFs had such limits or alternative arrangements in place.
9.19 In Article 35 of the draft Regulation the European
Securities and Markets Authority would receive a "position
management" power to actively intervene in positions to preserve
market integrity and orderliness where there was a threat to financial
stability or to the functioning of financial markets for commodities
in all or part of the EU. This power could only be invoked when
a competent authority had not taken sufficient measures to address
the threat.
9.20 The recast Directive also deletes the existing
exemption for persons dealing on own account in commodities and/or
commodities derivatives.
Competition in clearing and trading
9.21 Articles 28 and 29 of the draft Regulation would
give central counterparties (CCPs) and trading venues a right
of access to trading venues and CCPs respectively so that access
could not be restricted to parties within the same corporate structures.
CCPs would have to treat transactions that they were clearing
in a non-discriminatory way in relation to netting, margin off-sets
and fees irrespective of the venue on which the transaction was
to be concluded. Under Article 30 of the draft Regulation, owners
of intellectual property in relation to benchmark indices would
have to license that proprietary information in a fair, reasonable
and non-restrictive fashion.
Transaction reporting
9.22 Articles 21 to 23 of the draft Regulation would
set out requirements for reporting of transactions in financial
instruments. The range of instruments subject to a regulatory
transaction reporting obligation would be widened from transactions
in "financial instruments admitted to trading on a regulated
market" (under the existing Directive) to transactions in
all financial instruments traded on a regulated venue.
Investor protection
9.23 The proposal would introduce a number of changes
that aim to increase investor protection. As part of the Commission's
work to make the regulatory treatment of Packaged Retail Investment
Products (PRIPs) more uniform, structured deposits are intended
to be brought into scope, through Article 1(3) of the draft Directive,
which would apply the MiFID rules on conduct of business and conflicts
of interest where they were sold by credit institutions.
9.24 Article 24 of the draft Directive would introduce
a requirement for investment advisers to make it clear on what
basis they provided advice, specifying whether it was provided
on an independent basis and whether it was based on a broad or
on a more restricted analysis of the market. Restrictions would
be placed on commission payments to firms providing independent
advice and on firms providing portfolio management.
9.25 Amendments would be made by Article 25 of the
draft Directive to the execution-only regime, which ensures investors
can easily buy or sell non-complex products without the investment
firm having to judge whether they are appropriate or not. Clarification
would be given that bonds eligible under this regime would have
to be traded on regulated markets, equivalent third country markets
or MTFs and that certain instruments that embed derivatives or
incorporate structures which made the risks difficult to understand
would be excluded.
9.26 The current MiFID places an obligation on firms
that execute orders for clients to ensure they get the best possible
result. The recast Directive would introduce additional requirements
for those firms to publish data on the quality of their execution
and on the execution venues used to execute client orders. Firms
must already provide information about their execution policy,
but the proposal would further specify that this should be clear
and provide sufficient detail such that clients could understand
how their orders would be executed.
Product intervention
9.27 Article 32 of the draft Regulation would give
a competent authority the power to prohibit or restrict in that
Member State the marketing, distribution or sale of certain financial
instruments or types of financial activity or practice, if there
were significant investor protection concerns or a serious threat
to the orderly functioning and integrity of financial markets
or the stability of whole or part of the financial system. Powers
would be given to the European Securities and Markets Authority
under Article 31 of the Regulation to temporarily prohibit or
restrict in the EU the marketing, distribution or sale of certain
financial instruments or types of financial activity or practice,
if the action addressed a threat to investor protection or the
orderly functioning and integrity of financial markets or the
stability of whole or part of the financial system and competent
authorities had not taken action to address the threat.
Corporate governance
9.28 The Commission indicates that, in line with
its wider work on corporate governance in the financial sector,
existing provisions in the MiFID for investment firms and market
operators need to be strengthened. Article 9 of the draft Directive
would introduce provisions for investment firms concerning the
governance arrangements of their management bodies. Equivalent
provisions for market operators would be introduced by Article
48 of the draft Directive. Members of a management body of an
investment firm or market operator would have to be of sufficiently
good repute, possess sufficient knowledge, skills and experience
and would have to commit sufficient time to performing their duties.
In addition, members of a management body should not combine at
the same time more than one of the following combinations:
- one executive directorship
with two non-executive directorships; and
- four non-executive directorships.
Firms and operators would also have to take into
account diversity as one of the criteria for selecting members
of the management body. In particular, the Commission proposes
that institutions should be required to put in place a policy
of promoting gender, age, geographical, educational and professional
diversity on the management body. The European Securities and
Markets Authority would be tasked with developing draft regulatory
technical standards concerning the makeup of the management body
and in benchmarking diversity.
The Commission's impact assessment
9.29 The Commission's proposed legislation is accompanied
by an impact assessment and an executive summary of that assessment.[58]
The Government's view
9.30 The Financial Secretary to the Treasury (Mr
Mark Hoban) gives us no indication of the Government's overall
view of these Commission legislative proposals. Instead he gives
us detailed comment on various aspects of the proposals as follows.
New Organised Trading Facility category
9.31 The Minister says that:
- introduction of a new regulatory
category of trading venue, the OTF, would bring more direct regulation
to a number of over the counter (OTC) trading systems;
- for example, these facilities would need to adhere
to similar organisational requirements, such as maintenance of
risk controls, which apply to Regulated Markets and MTFs;
- most significantly, though, they would become
subject to an overarching transparency regime — something
previously not required for OTC venues;
- existing models expected to fall within the OTF
category include multidealer "request for quote" systems,
inter-dealer broker trading platforms and so-called "broker
crossing networks" in which investment banks match their
clients' equity buy and sell orders together away from an exchange;
- the provision in the draft text prohibiting OTF
operators from executing client orders against the operator's
own capital potentially carries significant commercial implications
for investment banks;
- for example it is current practice for some investment
banks to take one side of a significant proportion of client trades
in their internal equity "crossing networks" and capital
provision is an integral part of market-making in fixed income
instruments;
- the Government's initial priority in this area
is to obtain greater clarity from the Commission over what types
of trading system it is seeking to capture within the OTF definition;
and
- the Government will continue to argue that any
features that necessitate fundamental changes to firms' business
models needs to be fully evidenced and a convincing case made
that the costs of action outweigh the benefits.
Pre-trade transparency
9.32 The Minister tells us that:
- the requirement that OTFs should
make public, on a continuous basis, "current bid and offer
prices and the depth of trading interest at those prices"
potentially represents a significant change to existing market
practice in many instruments likely to be traded over the new
facilities;
- for example, OTC bond markets are currently heavily
reliant on the willingness of dealers to "make markets"
for end-investors — quoting prices either bilaterally at
the request of a client or over a competitive "request-for-quote"
platform;
- this market structure reflects the fact that
many bonds trade only very rarely following issuance, meaning
that the chances of a buyer and a seller wishing to trade a bond
at the same time are lower than in other more liquid markets,
such as equities;
- dealers intermediate between buyers and sellers,
charging for the risk they incur by holding the instruments during
intermediation;
- a requirement that dealers make their trading
interest public would pose the risk that, to compensate themselves
for the risk of adverse market movements associated with the rest
of the market knowing their trading intentions, dealers would
widen their bid-offer spreads;
- alternatively they might cease to offer markets
in certain instruments;
- any such reduction in secondary market liquidity
could lead to increased costs of funding for bond issuers;
- the eventual impact of this proposal would be
uncertain until the implementing stage, when the Commission would
set out in delegated acts the circumstances in which this overarching
pre-trade transparency requirement could be waived; and
- given the potentially significant commercial
and market consequences of decisions due to be taken via delegated
acts, the Government will work to achieve clarity in the draft
Regulation about the factors the Commission would take into account
when deciding on which models to provide with a waiver.
Systematic Internalisers (SIs)
9.33 The Minister continues that:
- to complement the transparency
regime for OTFs, the draft legislation would introduce a side-regime
for bilateral trading of bonds, derivatives and other instruments
— a non-equity SI regime;
- the requirement in this regime that quotes provided
to clients should be made available to other clients of the investment
firm, and be firm where the quote was below a certain size, poses
similar issues to those he sets out in relation to pre-trade transparency;
- that is to say, the disclosure of buying and
selling interest in illiquid markets stands potentially to increase
the risk of market-making and result in a reduction of liquidity;
and
- given the potential negative consequences for
liquidity the Government will be requesting further guidance from
the Commission as to the purpose of this proposed regime, what
sort of trading it envisages would be captured and what impact
on liquidity is foreseen.
Trading obligation for derivatives
9.34 The Minister says that:
- the proposed obligation that
clearing-eligible, sufficiently-liquid derivatives be traded on
organised venues is designed to give effect to a September 2009
G20 commitment that "all standardized OTC derivative contracts
should be traded on exchanges or electronic trading platforms,
where appropriate";
- as drafted, the European Securities and Markets
Authority would make the critical judgements over which asset
classes are sufficiently liquid to warrant mandatory trading on
organised venues;
- given the size of the OTC derivatives market
in London, these judgements could have very significant implications
for the future of OTC derivatives trading; and
- as such it will be a Government priority to ensure
that the authority's discretion is sufficiently constrained so
that fundamental decisions about the future shape of derivatives
markets could not be taken at that level.
Algorithmic trading
9.35 Next the Minister tells us that:
- the Government welcomes many
of the Commission's proposals in this area, particularly those
which would give greater clarity over the organisational requirements
and risk controls which apply to users of algorithms;
- it is concerned, however, about the requirement
that any algorithmic trading strategy be in continuous operation
and post firm quotes at competitive prices, providing liquidity
at all times and regardless of prevailing market conditions;
- as drafted this requirement would potentially
capture a very wide range of trading strategies, including, for
example, those used by traditional investors and asset managers
to minimise the market impact of their trading;
- the result could be material disruption to market
liquidity; and
- the Government will work with the Commission
to clarify the purpose and scope of this measure.
Third country access
9.36 The Minister says that:
- the Government has concerns
about the impact of the new regime proposed for governing the
provision of investment services by third country firms;
- the proposals represent a considerable tightening
of the current access requirements;
- it seems unlikely that many third country jurisdictions,
even those in developed countries, would meet the equivalence
and reciprocal access test;
- this has the potential to disrupt a number of
the ways in which EU investors and counterparties legitimately
interact with and benefit from the services provided by third
country firms;
- the consequence of erecting barriers could have
a significantly negative effect on the ability of EU investors
to spread and hedge investment risk and of EU businesses to access
key global funding sources such as Asia;
- the continued pursuit of investment opportunities
in non-EU emerging and developed markets could also be severely
curtailed;
- the Government welcomes the exemption for services
provided at the exclusive initiative of a person in the EU —
but this does not go far enough to avoid potentially damaging
consequences for trade in financial services, both into and out
of the EU, if the proposals proceed as drafted; and
- a wider exemption may be needed, and transitional
provisions should be strengthened to avoid denying access to third
country firms before an equivalence determination has been made.
Competition in clearing and trading
9.37 The Minister comments next that the Government
strongly supports the Commission's proposals to improve access
to CCPss and to benchmark indices, saying that this goes some
way to addressing certain potential anticompetitive impacts that
could arise from the European Markets Infrastructure Regulation
on clearing of OTC derivatives.
Regulation of commodities derivatives markets
9.38 The Minister tells us that:
- the Government supports the
goal of ensuring commodity derivatives markets operate in a transparent,
fair and orderly way, and welcomes the overall objectives of the
regulatory regime set out in Article 59 of the draft Directive
— to support liquidity, prevent market abuse and support
orderly pricing and settlement conditions;
- the most effective way to achieve this, whilst
preserving liquidity and market functioning, is to deploy a wide
and flexible position management approach, based on strong supervision
and market monitoring, allowing regulators and exchanges to intervene
at any point in the contract curve, including to make traders
wind down positions of any size, where they are deemed of concern
to the exchange/market authority;
- this is consistent with Committee of European
Securities Regulators (CESR) advice to the Commission[59]
and in line with the recent International Organisation of Securities
Commissions,[60] endorsed
by the G20 leaders in Cannes on 4 November 2011, on the supervision
and regulation of commodity derivatives markets;
- the Government therefore considers it important
that the 'alternative arrangements' to position limits proposed
in Article 59 of the draft Directive be allowed to fully function
— a primarily limits based approach would not necessarily
produce a more robust regulatory regime, and if not set at the
appropriate level, limits would have the ability to harm liquidity
and market functioning;
- whilst recognising there may be an appropriate
role for the European Securities and Markets Authority to ensure
the consistency of rules applied across Member States, the Government
also has reservations about the wide ranging power proposed for
the Commission to establish the rules, through delegated acts,
regarding position limits and alternative arrangements (which
would take precedence over those set by competent authorities);
- decisions on when and at what level to apply
limits or other arrangements most appropriately rest with the
authority conducting the front-line supervision of those markets,
that is, the national regulator and/or exchange level as appropriate
for the specific case;
- with regard to the changes to exemptions in Article
2 of the draft Directive, while it is important to keep the scope
of exemptions under review to ensure systemically important and
high impact participants and activities are within the MiFID's
regulatory perimeter, the Government does not believe there is
currently a strong case for a significant change in the boundaries
of MiFID for firms trading commodity derivatives; and
- the proposed changes to the exemptions could
have implications for the capital requirements of commodities
trading firms, impacting on their hedging and risk management
and possibly resulting in higher prices for end users.
Investor protection
9.39 Finally, on the different aspects of the proposals,
the Minister says that:
- the Government welcomes the
Commission's work to increase the overall level of protection
for investors;
- there must, however, also be awareness of the
economic and social need to provide consumers with the best opportunities
for return on their investments, particularly during a time of
economic recovery, and to ensure there is an appropriate balance
between protection, accessibility, consumer responsibility and
cost;
- the Government is concerned by the Commission's
approach to regulation of selling practices for PRIPs, which would
be split between the MiFID and the Insurance Mediation Directive,
for which amendments are expected in 2012;
- this poses significant risk of discrepancies
arising between the two instruments that could undermine regulatory
consistency for different types of products that essentially do
the same thing;
- a cross-sectoral approach would avoid unjustified
divergence and ensure a good outcome for consumers and a competitive
market for firms who would not have to operate under separate
rules depending on the type of investment product they were distributing;
- on proposed changes to the execution-only regime,
the Government believe the regime has worked well, and has ensured
consumers have access to the services that they want and at low
cost;
- it provides retail investors with the ability
to make their own investment decisions without taking advice or
requiring firms to tell them whether a particular product is appropriate
for them; and
- while proposals from the Commission to clarify
the scope of the regime are to be welcomed, it will be important
to ensure that the proposals would not reduce consumer access,
increase burdens on businesses or damage the Undertakings for
Collective Investment in Transferable Securities brand.
9.40 On the financial implications of the proposals
the Minister says that:
- additional resource would be
required for the European Securities and Markets Authority, in
order for it to undertake technical work to inform the application
of the new regime after negotiation;
- the proposals include provisions for the authority
to develop 14 sets of new binding technical standards, three sets
of guidelines and a report on aspects of the new regime;
- overall, the legislative financial statement
published with the proposals estimates the authority would require
an additional eleven full-time equivalent posts, with the necessary
funding stemming from a co-financing arrangement (where Member
States would contribute 60% of the funds required and the Union
the remaining 40%);
- the overall contribution of Member States is
estimated at €2.62 million (or about £2.25 million);
and
- there is no impact on the EU Budget.
9.41 The Minister tells us that:
- the Government has established
stakeholder groups to give users and representatives of industry
in the UK an opportunity to share views on the proposals and to
gain a more developed understanding of their impact;
- as part of this consultation, the Government
will seek further information on the likely impacts on affected
sectors from UK firms; and
- we will be seeing the Government's provisional
impact assessment.
Conclusion
9.42 Although the Minister does not say so, we
presume from the tone of his comments that the Government is,
in principle, supportive of the draft Regulation and the draft
Directive. However, we note the significant number of points the
Government wants clarified or amended during negotiation of the
proposals. So before considering the matter further we should
like to hear about progress in addressing these matters. And we
should also like to have, in due course, the Government's provisional
impact assessment of the draft legislation and an account of the
outcome of its consultations with its stakeholder groups to assist
our further consideration of the proposals.
9.43 Meanwhile the documents remain under scrutiny.
57 The EU definition of financial instruments can be
seen at http://register.consilium.europa.eu/pdf/en/11/st15/st15939.en11.pdf,
p. 168. Back
58
They can both be seen at http://ec.europa.eu/internal_market/securities/isd/mifid_en.htm.
Back
59
See http://www.esma.europa.eu/index.php?page=document_details&from_title=Documents&id=7279.
Back
60
See http://www.iosco.org/library/pubdocs/pdf/IOSCOPD358.pdf. Back
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