Exchange guidelines to aid transparency

The London Stock Exchange yesterday announced new trade publication rules to bring slightly greater transparency to the market. The changes were made necessary by the need to comply with the European Union's Investment Services Directive, which takes effect on 1 January, 1996.

Commonly known as the "single passport", this directive will allow investment firms recognised in one EU country to operate freely in every other member state on the basis of its home authorisation.

But the Stock Exchange also hopes the slight relenting on transparency will be sufficient to head off pressures for more radical changes from the Security and Investments Board, and the Office of Fair Trading, both of which have raised concerns about distortions in the market because of the generous non-disclosure privileges given to market makers. "We see this as a small concession to the SIB," an exchange source said.

From 1 January, for UK securities on Seaq, the automatic price quoting system, and European securities on SEAQ International, the following publication rules will apply:

All small trades up to the size of six times normal market size will be subject to immediate publication, instead of the three times applicable today.

Trades between six times normal market size and 75 times will be subject to a delay in publication of up to 60 minutes, instead of the current 90 minutes.

The five-day publication delay for large bloc trades will be unchanged.

The Stock Exchange has discussed the rule changes with the SIB, which is currently conducting a wide-ranging equity market review. Part of this looks at proposals for curbing the exemptions given market makers, which have recently been strongly criticised as anti-competitive in a report from the Office of Fair Trading.

Stock Exchange sources said it was their understanding that the greater transparency contained in the new rules is sufficient to satisfy the requirements of the SIB review.

The report on this review, which will take account of the OFT's recommendations, is to be passed to the Chancellor of the Exchequer in the summer. "The Treasury has agreed that such a regime will make the London equity market consistent with the terms of the ISD. This does not pre-empt in any way the Treasury's response to the report on trade publication from the OFT," the Stock Exchange's statement said yesterday.

Under the new rules, member firms will also have from 1 January 1996 to report immediately to the London Stock Exchange all transactions conducted in the international market, whether in EU or non-EU securities.

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