* EU's Barnier tries to stop dilution of planned rules
* Barnier wants fewer exemptions for bonds, dark pools
* Ireland, Czech Republic, Dutch, Slovakia have concerns
* EU presidency attempts compromise on commodities
By Huw Jones
LONDON, Nov 15 A battle over the rules governing
Europe's stock, bond, commodities and derivatives markets
rachets up next week when the EU's financial services chief
pushes for stricter controls which some member states say risk
driving business away.
European Union commissioner Michel Barnier fired a first
shot last month when he warned the European Parliament and
member states not to dilute his sweeping reform of the bloc's
securities trading rules known as Markets in Financial
Instruments Directive or MiFID.
Barnier said opaque markets like derivatives helped deepen
the financial crisis of 2007-09. Industry officials say too much
transparency will make it costlier for institutional investors
to trade, as others in the market would see their position and
trade against it.
Britain, by far the EU's biggest securities market, will be
vigorously defending the City from any intervention which it
thinks will drive investors to other parts of the world.
Parliament and EU states will meet next Thursday to decide
how transparent trading should be, and who should be in charge
of capping trading positions in commodities.
They agree that "dark pool" or anonymous, off exchange share
trading should be curbed but have yet to decide how.
The lawmakers propose reducing some of the existing
exemptions to publishing prices in advance of trade, while EU
states prefer some sort of cap on dark trading volumes. Barnier
has proposed combining the two in a double crackdown, an EU
paper seen by Reuters showed.
Member states meet on Monday to prepare for the negotiations
and Ireland, the Netherlands, the Czech Republic and Slovakia
signalled their opposition on Friday in a joint response.
"We do not support inappropriate restrictions on waivers as
a means of protecting price formation, especially so where there
is no impact assessment to support any such restrictions," they
Although the final decision on the law rests solely with the
lawmakers and member states, the industry worries that Barnier's
intervention could tip the balance in favour of slightly tougher
rules than had been anticipated.
Parliament goes to the polls next May and a deal is needed
in coming weeks to avoid a serious delay on rules the EU and
other leading economies have pledged to introduce.
BONDS AND COMMODITIES
Proposals from Barnier also want to reduce current
exemptions from transparency rules in bond and derivatives
"Like derivatives markets, bond markets are dominated by
dark trading which hinder effective price formation and protects
a handful of brokers from effective competition," it said.
But so far parliament and EU states don't want to change how
the government and corporate bond markets operate.
"If these proposals are implemented in the way envisaged in
the European Commission paper then it's not immediately apparent
what the benefit to investors would be," said John Serocold, a
senior director at the International Capital Market Association,
a bond market trade body.
MiFID will also reshape commodities trading but there is no
consensus yet on who should have the power to determine caps on
trading positions, a new rule backed by policymakers who blame
"speculation" on pushing up energy and food prices.
EU states want national regulators to police positions while
parliament wants the European Securities and Markets Authority
to take on this role. The bloc's residency Lithuania has
proposed a combination of the two approaches.
The presidency is also siding with lawmakers in only
including netted trades for totting up a commodity position and
is also proposing to apply caps to some types of commodity
derivatives traded off an exchange.