Finance Watch: Most OTCs breach Mifid
Tuesday 6 December 2011 - by Karina Whalley
The European Parliament's economic and monetary affairs committee met on Monday to discuss regulating investment services in the second Markets in Financial Instruments Directive.
"We are witnessing today in the markets something very perverse. The dark side of the market is feeding itself from the light side of the market as a type of free-rider."
Dark pools are block trades carried out away from central exchanges, where prices are not made public until after the transaction has taken place. European regulators are hoping to move most OTC trades onto organised trading facilities in order to clamp down on dark pools, but Philipponnat warned that without redefining OTCs, most would not move onto OTFs.
"What needs to be done is to strengthen the definition of OTC in Mifid. It is very weak," he said.
NYSE Euronext's deputy chief executive Dominique Cerutti, speaking at the same hearing, called for the definition of OTC to be clarified, saying this would move towards making it "legally enforceable" in helping to tackle loopholes.
He said: "We believe that the transparency of Mifid I is not being respected."
Karel Lannoo, head of think tank the Centre for European Policy Studies, also gave evidence before the committee saying that ambiguities in Mifid need clarification but warned against over-regulation.
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