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The European Commission will propose the updated Markets in Financial Instruments Directive on Wednesday. It follows on the commitment of Group of 20 nations to increase oversight and transparency of opaque parts of the financial system. The proposal seeks to minimise differences in market regulation among European Union countries, and impose minimum sanctions for rule-breakers. "The financial crisis has exposed weaknesses in the regulation of instruments other than shares, traded mostly between professional investors", said the draft document.
The draft says that transparency requirements will apply to all trading venues, from small brokerages to major exchanges. Previously, only stock exchanges were subject to these requirements. However under the new rules, different financial products will have different reporting requirements.
The proposal does not go into detail on how requirements for corporate bonds or derivatives might differ from stocks however. In light of the explosive growth in derivatives trading in recent years, the EU proposed that national regulators should be able to demand information on derivative positions from any person. Regulators would also be able to force a trader to reduce a derivatives position and limit their ability to enter into commodity derivatives contracts. The proposal says commodity trading venues should publish a weekly breakdown of positions in various commodity markets.