Activites

• 2004/04/30 Final act published in Official Journal
  • Directive 2004/39
  • OJ L 145 30.04.2004, p. 0001-0044
• 2004/04/21 Final act signed
• 2004/04/21 End of procedure in Parliament
• 2004/04/07 Act approved by Council, 2nd reading
• 2004/03/30 Decision by Parliament, 2nd reading
  • T5-0212/2004 summary

    The European Parliament adopted the resolution drafted by Theresa VILLIERS (EPP-ED, UK) in line with a compromise worked out between the rapporteur and the Council. Under the terms of the compromise, the Council will change the threshold of block-sized quotes, above which firms do not have to disclose publicly the price of trades before a transaction takes place. This means more transactions will be excluded from the obligation to publish pre-trade prices. The threshold for the quoting obligation will now be the "standard market size" instead of "large in scale compared to normal market size". The calculation for the standard market size will be based on an arithmetical average of orders executed in the market. The standard market size for any class of share must not be significantly disproportionate to any share included in that class. Concerning price improvement, the common position remains basically unchanged. Accordingly, significant restrictions remain on the price improvement clauses, which allow quoted spreads to be wider than the best bid on offer, so as to protect against the additional risk of public quotes. Firms will not be able to improve on their public quote when dealing with retail clients. Price improvement will be possible for professional clients, under stricter conditions that Parliament had proposed. The directive will allow, as Parliament had requested, execution only services to continue, though under more complex conditions that those proposed by Parliament. The definition of firms that must comply with the directive remains largely unchanged. A new recital states that it is not the intention of the directive to require the application of pre trade transparency rules to transactions carried out on an OTC basis, the characteristics of which include that they are ad-hoc and irregular and are carried out with wholesale counter parties and are part of a business relationship which is itself characterised by dealings above standard market size, and where the deals are carried out outside the systems usually used by the firm concerned for its business as a systematic internaliser.�

• 2004/03/29 Debate in Parliament
  • Debate in Parliament
• 2004/02/24 Vote in committee, 2nd reading
  • A5-0114/2004
• 2004/01/15 Committee referral announced in Parliament, 2nd reading
• #2552
• 2003/12/08 Council Meeting
  • 13421/3/2003 summary

    The common position was adopted by qualified majority, Ireland, Luxembourg, Finland, Sweden and the United Kingdom voting against. The common position is broadly in line with the Commission 's proposal as well as the European Parliament's opinion. The main elements of this common position are as follows: - on the issue of "internalisation" by banks and investment firms of client orders to buy and sell equities outside regulated markets, the Council has now agreed that it must be allowed in all Member States, whereas some countries do not currently allow it. However, the compromise text attaches conditions to prevent market distortion and ensure investors, particularly retail investors, are not sold short or overcharged through a lack of market transparency; - for deals up to a certain value - the Council has agreed on a threshold value somewhat higher than the Parliament's opinion - investment firms would need to reveal to the markets details of client orders and, if the firms are trading on their own account, some indication of the terms on which they themselves stand ready to buy or sell a specified share. For larger deals where it can be assumed professional investors are involved, these requirements would not apply, allowing prices to be fixed by a process of negotiation, which could continue ("price improvement") even after an initial quote. Firms would not be obliged to offer each quote to all their clients, professional and retail they would be able to decide on whom to give access to each specific quote, provided they do not discriminate between investors in the same category; - as far as ensuring retail investors are not sold inappropriate products, the Council's text clarifies and adds some nuances to the Commission's proposal and to the Parliament's opinion. It provides for a full suitability test to be applied when a firm is providing investment advice, no suitability test for execution-only business instigated by the customer and a "light" suitability test for circumstances in between. The Commission can support this solution. The Council's political agreement also reflects a compromise on when "home country" regulation should apply, in other words in which respects investment firms' activities should be regulated by the authorities in the Member State where they are principally based, and where there should be "host country" regulation" in the Member States where they operate.�

• #X019
• 2003/10/07 Council Meeting
• 2003/09/25 Decision by Parliament, 1st reading/single reading
  • T5-0410/2003 summary

    The European Parliament adopted a resolution drafted by Theresa VILLIERS (EPP-ED, UK) and made several amendments to the Commission's proposals. (Please see the document dated 02/09/03.) To expand on certain definitions, Parliament stated that systematic internalisation means the execution, on a systematic, regular and continuous basis, of: - orders up to a standard market size undertaken by any type of client or counterparty, - transactions in shares admitted to or included in trading on a regulated market, - transactions on own account or by means of matching with other client orders, - transactions within a system, a component of which is primarily aimed at facilitating the activities set out in the first and third points above; - transactions outside the rules or systems of a regulated market or MTF. Where executions in several securities are part of one transaction (such as portfolio transaction), the size of the total transaction will determine whether the transaction was of standard market size. Parliament also wanted investment firms exempted from the scope of Directive 93/6/EEC to have sufficient financial capacity, which entails: - minimum initial capital of EUR 50 000; - professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least EUR 1 000 000 applying to each claim and in aggregate EUR 1 500 000 per year for all claims; or - a combination of the above points, in a form resulting in protection equivalent to one of them. On the question of conflict of interest, it must be left to investment firms, subject to regulatory oversight, to determine the appropriate mix of prevention, management and disclosure. The Commission must take into account the frequency of conflicts of interest (whether they occur regularly or in limited, individual cases) in different types of investment firms. Finally, Member States must require that investment firms implement effective procedures for monitoring execution quality. In assessing these procedures, account must be taken of the extent to which the procedures enable the firm to identify and correct recurrent inefficiencies in its execution practices. Member States must also ensure that investment firms inform their clients of any significant change to their execution policy, whereupon clients have the right to terminate any contractual arrangement.�

• 2003/09/23 Debate in Parliament
  • Debate in Parliament
• 2003/09/02 Vote in committee, 1st reading/single reading
  • A5-0287/2003
• #2513
• 2003/06/03 Council Meeting
  • 2513
• 2002/12/16 Committee referral announced in Parliament, 1st reading/single reading
• #2471
• 2002/12/03 Council Meeting
  • 2471
• 2002/11/19 Legislative proposal published
  • COM(2002)0625 summary

    PURPOSE : proposal for a new Driective on investment services and regulated markets. CONTENT : the current Investment Services Directive (ISD), adopted in 1993, sought to establish the conditions in which authorised firms and banks could provide specified services in other member States on the basis of home country authorisation and supervision. Services eligible for a passport under the present ISD include brokerage, dealing, individual portfolio management, transmission of investor orders and underwriting/placing activities. The existing ISD no longer provides an effective framework for undertaking investment business on a cross-border basis in the EU. The principal shortcomings of the existing ISD include the following: - it does not provide sufficient harmonisation to allow effective mutual recognition of investment firm licences; - it contains outdated investor protection disciplines; - ISD does not span the full range of investor-oriented services; - ISD does not address the regulatory and competitive issues that arise when exchanges start competing with each other and with new order-execution platforms; - ISD provides for an optional approach to the regulation of market structure creating a formidable stumbling block to the emergence of an integrated and competitive trading infrastructure; - ISD provisions relating to designation of and cooperation between competent authorities are under developed; - ISD provisions are inflexible and out of date, unable to respond to pressing regulatory issues caused by evolving market structure and business and supervisory practices. This proposal serves two over-arching regulatory objectives: - the protection of investors and market integrity by establishing harmonised requirements, governing the activities of authorised intermediaries; - the promotion of fair, transparent, efficient and integrated financial markets. This goal will be furthered by the development of ground rules governing the negotiation and execution of transactions in financial instruments on organised trading systems and marketplaces, and by investments firms. The new directive is discussed under the following headings: i) measures to promote an efficient, transparent and efficient financial trading infrastructure. It should be noted that the proposal envisages the introduction of a new core service relating to the operation of an MTF ("Multilateral Trading Facility".) The revision of the ISD seeks to create a regulatory framework in which obligations are tailored to the specific risk-profile of different market participants, and which takes account of competitive and regulatory interactions between different trading formats so as to maintain overall market efficiency. Transparency obligations are emphasised. ii) clauses governing the provision of investment services, with a view to protecting investors and fostering market integrity. The proposal envisages a far-reaching modernisation and reinforcement of the obligations that investment firms must comply with when providing services to clients or acting in the marketplace, as well as rights to which investment firms are entitled by virtue of ISD authorisation. The relevant provisionsencompass: - conditions for initial authorisation, including organisational requirements. This includes modification of the Capital Adequacy Directive; - general operating conditions including conflict of interest identification and management; - obligations of investment firms when providing services to clients, including conduct of business rules, best execution obligations and client order handling rules. There is provision for the adoption of common conduct of business rules through comitology. The proposal also establishes a separate provision governing the best execution obligations of brokers/broker-dealers. - requirements to uphold market efficiency, including transparency obligations; - provisions governing the rights of investment firms. iii) proposed extensions to the scope of the Directive. It is proposed to expand the scope to integrate some investor-facing actives or dealing activities that are financial in character, are widely offered to investors, clients, or financial market participants, and/or which give rise to investor or market-facing risks which could usefully be addressed through the application of core ISD disciplines. The most notable changes (apart from the inclusion of MTF operation) relate to the inclusion of investment advice, financial analysis, and commodity derivatives. iv) other issues such as clearing and settlement and supervisory cooperation. There are also provisions on comitology. The proposal confines its treatment of clearing and settlement to clarification of the rights of the investment firm and regulated market populations in terms of access to/choice of clearing and settlement facilities located in other Member States. These rights are to absolute: demonstrable prudential concerns on the part of the supervisor, or commercial interests of clearing and settlement providers may prevail over the access demands of investment firms or market operators.�

  • DG [{'url': 'http://ec.europa.eu/dgs/internal_market/', 'title': 'Internal Market and Services'}],

Documents

• Legislative proposal published: COM(2002)0625
• Debate in Council: 2471
• Debate in Council: 2513
• Committee report tabled for plenary, 1st reading/single reading: A5-0287/2003
• Debate in Parliament: Debate in Parliament
• Decision by Parliament, 1st reading/single reading: T5-0410/2003
• Council position published: 13421/3/2003
• Committee recommendation tabled for plenary, 2nd reading: A5-0114/2004
• Debate in Parliament: Debate in Parliament
• Decision by Parliament, 2nd reading: T5-0212/2004
• : Directive 2004/39
• : OJ L 145 30.04.2004, p. 0001-0044

History

(these mark the time of scraping, not the official date of the change)