20 June 2003

ECB opinion on ISD

The ECB released its opinion on the forthcoming Investment Services Directive. The Central Bank states that the proposed directive leaves a very significant asset class outside the pre- and post-trade transparency obligations. In addition, neither the proposed directive nor the explanatory memorandum explains the reasons for this limited implementation of the pre- and post- transparency obligations.

On the contrary, Section II of the explanatory memorandum states that at the heart of the proposed directive is an effective transparency regime, which seeks to ensure that appropriate information regarding the terms of recent trades and current opportunities to trade in all marketplaces, trading facilities and other trade-execution points is made available to market participants on an EU-wide basis4. In line with this declaration, Article 23 of the proposed directive refers to all financial instruments listed in Annex I in connection with the transparency obligations. However, Articles 25, 26, 27, 28, 41 and 42 unexpectedly limit the pre- and post-trade transparency obligations to shares.

On the application of the legislative methodology the ECB would generally favour that in future Community legal acts containing such basic framework principles take the format of Regulations instead of Directives, leaving the implementation of such principles to ‘Level 2’ legislation by way of the comitology procedure taking into account national technical needs.

The ECB would support the possible use of directives in ‘Level 2 Implementation Legislation’ wherever there was a need to take into account national specificities in detail. Finally, the ECB notes that, in general, the national central banks of Member States (NCBs) should be closely involved in the preparation of implementing measures relating to their respective competencies (e.g. clearing and settlement systems: see also paragraphs 18 to 22 of this opinion).

ECB Opinion

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