The Council reached political agreement on a common position to the Investment Services Directive. The agreement was reached by qualified majority, the United Kingdom, Luxembourg, Swedish, Finnish and Irish delegations voting against.
On the pre-trade transparency issue, the Council agreed that 'systematic internalisers' would be required to publish a firm quote in those shares admitted to trading on a regulated market and for which they want to trade.
The quote would have to include a firm bid and offer price or prices as well as the size or sizes attached to those price or prices, and reflect prevailing market conditions for that share. However, this pre-trade transparency obligation would not apply to transactions of a size which is large compared to the normal market size. In the case of illiquid shares, public quotes would only have to be given on request.
'Systematic internalisers' would have to execute orders from retail and professional clients at the quoted prices, in the case of professional clients they could execute orders at a better price in justified cases on condition that:
the orders are of a size bigger than the size customarily undertaken by a retail investor
the price at which the order is executed falls within a range and
this range is made public together with the quote and must be close to market conditions.
The European Commission has welcomed the Council's political agreement on the proposed Investment Services Directive. Mr Bolkestein stated “This Directive will be of immense benefit to the City of London. Internalisers will obtain a single European passport and so be able to do business all over the EU, and notably in those Member States where internalisation is currently not allowed.
“The reason why the City is currently responsible for the largest part of internalisation business in the EU is precisely because it is not allowed in other countries. In terms of a level playing field, it is important that internalisation is accompanied by maximum price transparency, particularly for retail investors.
On the contrary, Theresa Villers, EP rapporteur to the directive, harshly criticized the Councils’ position.
“This is a dire result which is bad for financial markets across Europe - bad for investors and bad for competition. The text adopted by finance ministers is unclear and unworkable. It would add huge costs to investment firms and could grant a de facto monopoly to exchanges.
“We will all need to work hard to try to salvage something from this mess. I will be working closely with my colleagues in the European Parliament to promote a sensible and workable outcome on the ISD.
ECOFIN results
Commission press release 8 October
Commission press release 7 October
Villiers press release
Council Document (provisional version)
Council Document – Add (provisional version)
© Council of the European Union
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