Investors urge EU to be firm on more competition in share trading

LONDON Wed Sep 25, 2013 1:12pm EDT

LONDON (Reuters) - A broad coalition of investors, asset managers and brokers appealed to the European Union on Wednesday not to dilute proposed rule changes that would open securities trading to more competition.

The bloc's member states and the European Parliament are in final talks on revising trading rules, known as the Markets in Financial Instruments Directive (MiFID), to reflect rapid advances in technology and apply lessons from the financial crisis.

The negotiations have been bogged down for months, pitting Britain against Germany and France.

The coalition urged the bloc to keep a so-called "open access" proposal in MiFID which would give users of markets a choice of where to clear their securities transactions.

"Access will benefit end-investors, stimulate true choice in the execution and clearing of products such as exchange traded derivatives ... reduce costs and minimize risk in the financial system," its members said in a letter to the parliament and member states, seen by Reuters.

The letter was signed by the London Stock Exchange, the European Fund and Asset Management Association, BlackRock, Fidelity Worldwide Investment, State Street, Allianz Global Investors, the Association of British Insurers, the UK's Investment Management Association and its Italian counterpart Assogestioni.

Germany wants to dilute the open access provision in a step critics say will shield Deutsche Boerse (DB1Gn.DE) from opening up its in-house Eurex Clearing arm to competition.

Regulators are requiring derivatives to be cleared to make markets safer and more transparent but derivatives transactions on Deutsche Boerse must be cleared through Eurex Clearing.

France wants more share trading on transparent exchanges rather than "in the dark" or off exchanges.

Big investors worry that being forced to put orders on an exchange will make them vulnerable to high-frequency traders, who dart in and out of markets to exploit tiny price differences.

The letter said investors "seek genuine choice... to deliver better results for customers, savers and pensioners" and want waivers from having to put orders on an exchange.

"The strength of the recovery depends on the ability of companies and investors to access financial markets with confidence," the coalition's letter said.

"The MiFID review... should allow growing companies to access financing, facilitate investor choice in execution, decrease the cost of capital and avoid the concentration of risk," it said.

(Reporting by Huw Jones; Editing by Anthony Barker)