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According to Ms Villiers one of the most significant tasks in second reading will be to remove the threat to so-called “execution-only” share dealing. The text that the finance ministers adopted is unclear and the exemption from the suitability test will apply only “so long as the service is provided at the initiative of the client”. This could give rise to many practical problems, with frequent disputes arising regarding who said what to whom when a client discusses their savings with advisors at a bank.
It is also crucial to come up with a sensible and workable compromise on Article 25 on the quote disclosure rule. Many different groups in different member states feared that Article 25 would cause capital flight from the EU and a severe reduction in liquidity as firms ceased to provide liquidity, for fear of triggering an Article 25 obligation. The obligation could have been so onerous that it could have made it virtually impossible for investment firms to set up their own internal execution platforms, in competition with exchanges.
'Where next for the ISD' by Theresa Villiers, MEP, the Parliament Magazine, 3 November 2003
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