ISD Workshop: Debate on Internalisation – final report

23 April 2003

Graham Bishop moderated a debate limited to the merits and demerits of internalisation within the Investment Services Directive at the European Policy Centre, Brussels, on 02 April. Participants included senior executives from UK and continental investment banks, savings banks, regulators, European Commission officials and MEPs.

During the debate it became clear that there are considerable differences between existing practices in the 15 EU member states. There was broad consensus that it would be difficult for Europe to move to a single infrastructure in less than a decade or more. Consequently there would need to be a degree of flexibility to pre-empt a ‘big-bang’ that might still not achieve the twin objectives of an efficient single market and the development of confidence and trust in the markets to encourage European citizens to save more.

Two clear conclusions emerged:

An efficient arbitrage of different price venues is expected to keep discrepancies between different markets and execution venues both brief and very small.

With a customer contract for “best execution policy”, there was general agreement that retail customers should still be well served - in a competitive market. But full consensus was lacking for the proposition that such a policy would obviate the need for mandatory pre-trade transparency.

Final report

© Graham Bishop