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Following the global financial crisis, the G20 endorsed a global transition of derivatives products which are currently traded through bilateral arrangements between two parties, or 'over‐the‐counter' (OTC), towards recognised exchanges or trading platforms where appropriate, in order to boost market transparency. The G20 also agreed that certain trading activity should be cleared through a central counterparty to reduce systemic risk and reported to trade repositories in order to enhance market information.
The crisis however showed that the opaqueness of some market segments, especially in the fixed income sector, partly triggered the cardiac arrest. AAA securities suddenly were no longer triple A and banks, who had promised to act as market makers, could not fulfil this promise. The lack of reliable price information, the lack of transparency ultimately killed the liquidity in those markets.
The European Commission believes that any actual or attempted manipulation of such key benchmarks can have a serious impact on market integrity, and could result in significant losses to consumers and investors, or distort the real economy.
Regulated markets exist to allow companies access to finance through capital markets. Regulated markets are interested in well‐run companies that produce long‐term growth for the EU economy. To this end, regulated markets impose and monitor corporate governance standards as part of the listing process. Only companies that meet these standards are allowed to list on a regulated market. These standards take the form of Codes or Recommendations that listed companies have to comply with. The enforcement of these standards is usually done on a ‘comply or explain’ basis.
The financial crisis was to a large extent due to a lack of market integrity in certain parts of the market. The measures that I have just described are only some of the more than 30 proposals issued by the EU since the beginning of the crisis. Market integrity should be strengthened once all these measures are implemented. You will hear voices saying that all of this is too costly, but I believe that the cost of not having them in place is much higher and we have all witnessed that during the last year.