Stephen Foley: EU makes its bid to tame the speculators, and it comes not a moment too soon

 

Outlook European Union officials are about to launch a new attempt to tame financial weapons of mass destruction and curb the speculators – and it seems not a moment too soon. A draft document circling among City law firms shows planned extensions to the EU's "markets in financial instruments directive", or Mifid for short, and the upshot is that it profoundly changes the balance of power between regulators and traders.

This Mifid II, a smorgasbord of proposals that have been finalised after much lobbying from banks and investors, will be published imminently and put out for a final consultation, but it is already clear there is much to like.

The proposals that have produced the most howls of rage so far are those that hand regulators power to set position limits on certain traders, when such limits are needed to bring market volatility under control. The City, represented by the UK Government, has largely lost out in its hope of limiting the draconian power of regulators to force speculators to sell their holdings on 24 hours notice.

The implementation of these new powers will take some hashing out, and even their adoption by EU member states is not yet guaranteed, but the need for them becomes more apparent by the day. The volatility of financial markets has been creeping up again, and it is not just because of the uncertainties over the economy and eurozone banks.

As the "flash crash" that afflicted the US market last year demonstrated, a new breed of high-speed trading computers hold sway, and because they operate across fragmented and often illiquid trading platforms, they are prone to causing mayhem. Mifid II also takes aim at these high-frequency traders, putting new requirements on them to keep running even through periods of market turbulence, if they want the privileges that come with being designated market-makers.

The most important change with Mifid II, though, is not in any specific set of proposals, but from its guiding principle, which is an insistence on transparency. New position reporting and data collection requirements, though expensive for the traders, are a prerequisite if regulators are to get a handle on our increasingly complex financial markets. This way, traders will no longer be able to run rings round the people who are supposed to control them for us.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...