Verbatim report of proceedings

Thursday, 25 October 2012 - Strasbourg

17. Markets in financial instruments and repeal of Directive 2004/39/EC - Markets in financial instruments and amendment of the EMIR Regulation on OTC derivatives, central counterparties and trade repositories (debate)

  President. − Colleagues, before opening the afternoon debate I would like to cordially welcome Commissioner Barnier. I would also like to congratulate him on the wonderful result he obtained last week in Bucharest running for the Vice-Presidency of the European People’s Party. Congratulations.

The next item is the joint debate on

- the report by Markus Ferber, on behalf of the Committee on Economic and Monetary Affairson, on the proposal for a directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (recast) (COM(2011)0656 - C7-0382/2011- 2011/0298(COD)) (A7-0306/2012), and

- the report by Markus Ferber, on behalf of the Committee on Economic and Monetary Affairson, on the proposal for a regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories (COM(2011)0652 - C7-0359/2011- 2011/0296(COD)) (A7-0303/2012).

  Markus Ferber, rapporteur. – (DE) Mr President, Commissioner, ladies and gentlemen, I think that, through today’s debate on the proposal for a directive of the European Parliament and of the Council on markets in financial instruments, we have advanced into the core area for financial market regulation within this legislative period; now we need to regulate the financial markets and not just look at individual products, as we did in the past.

I just want to pick out a few key terms. In the last year we have not made life easy for ourselves. We have conducted a hearing in committee, we have surveyed all the stakeholders and every interested group, and on this basis, through various processes, working documents and the like, produced a result which we are setting before this plenary session here today and tomorrow. I will take a few points from it.

Firstly, market structure. On the one hand, we must concede that in recent years something has happened in the financial markets which has made it in Parliament’s interest that each trade in securities takes place under the MiFID rules, which is why we have approved a new category – bounded by many conditions – called Organised Trading Facilities, where only non-equities can be traded, where proprietary trading is forbidden and where, with regard to execution, transaction and customer interaction, execution may take place at the operator’s discretion. Through this process I think that we are making an important contribution to ensuring that the entire area of traded OTC papers is handled within the MiFID environment.

Another major subject not considered in the last MiFID is algorithmic or high-frequency trading. Once again, we needed to issue clear rules here, so that these areas, which can be very dangerous and can be manipulatively employed, is subject to a strict system with minimum holding periods, trade interruption opportunities, the option to test algorithms, the option of examining algorithms within the supervisory structure, the introduction of tick-size regimes, a minimum price, and corresponding fee systems.

Another subject I would like to touch on is the area of commodities futures markets. I do believe that we have a particular responsibility here, when it comes to restricting the speculative part of commodities futures markets, not to contribute through bad regulation to a situation where people in the third and fourth worlds can no longer buy food. Because of this, we have chosen a two-pronged approach with the aim of curbing speculation but not thereby damaging the real economy. We want to achieve this by using position limits with strict ceilings on the number of contracts or positions. We also want to ensure, by means of the position-check system, that those who can prove that they really need a product do not suddenly speculate in this market.

Another issue that concerns us is the area of investor protection. I would like to point out here that we have chosen a very broad approach in guaranteeing protection for consumers and investors. This means that the requirements of specific customer groups need to be identified. Not every small saver needs access to highly complex papers. What is needed is to define the relevant products for target groups, carry out product testing, make telephone recordings, give relevant advice, disclosure requirements, but – I want to briefly mention – to proceed, with regard to commissions, in accordance with the principle of subsidiarity. Member States should be able, according to their structures, to make relevant accommodations. I think we are on the right track here.

My time is running out, so I thank everyone who has been involved. I think it is a shame that we only have four minutes’ speaking time for such a complex report. I thank all my colleagues who collaborated on this and the Commission for the very constructive role it has played in recent weeks and months. I hope that a strong vote in the plenary session tomorrow will put us in a situation to negotiate with the Council in order to resolve this important report as soon as possible.

  Michel Barnier, Member of the Commission. − Mr President, good afternoon to you all, thank you for your kind words on the success and importance of the internal market week in Bucharest, as in the other capitals, where we led this debate throughout last week.

We are talking about a major subject, which, as you know – and as Mr Ferber just reminded us – is a centrepiece of our regulatory agenda. I often show Ministers and Heads of State this table on the 29 texts that drive the Committee on Economic and Monetary Affairs led by Mr Bowles, all MEPs, coordinators and shadow rapporteurs to whom I extend my thanks. This central theme to some extent mirrors, for the financial markets, what we are doing with Mr Karas on capitalisation and prudential measures for the banking sector, so that, for financial markets as a whole, we have transparency, responsibility and also security for investors and savers, leaving no room − such is our goal − for regulatory arbitrage within the single market or with regard to other G20 partners.

That is why I offer very sincere thanks to Mr Ferber for his commitment, sharing with him the goal – which he mentioned – of being in a position to begin trialogue discussions very soon.

We share the same goals for MiFID in a number of areas, and your report, Mr Ferber, strengthens and consolidates our own proposals.

Firstly, concerning market structure, the Commission and Parliament have as their goal that all forms of negotiation, whether multilateral or bilateral, should take place in an atmosphere of transparency. Parliament has elected to introduce a definition of the over-the-counter market, coupled with an obligation to trade on transparent execution venues in the case of small-scale transactions. I am prepared to explore this avenue; however, any removal of the Organised Trading Facility (OTF) category for the equity market must be analysed very carefully.

We must also carefully measure the effects of such amendments compared with our own proposal. If we limit multilateral trading solely to regulated markets and venues for multilateral trading facilities, that would amount to abandoning reform of the current situation, which has precisely the effect, on certain platforms, of allowing high-frequency traders to cross their orders with those of investors, without the latter having any say whatsoever. We must therefore think carefully before limiting the scope of OTFs in this way.

Second point: high-frequency trading. If, honourable Members, we want to encourage transactions to migrate to multilateral, transparent trading venues, then yes, we must better constrain high-frequency trading, which is, indeed, in its element on such venues. In that regard, also, I think I may say that we share the same goals.

In general terms, this text is the chance to start from scratch with rules on high-frequency trading; I am ready to acknowledge – as I have already said – that high-frequency trading has some usefulness in providing liquidity but it is also undeniably a source of systematic risk for the markets. In banking we have begun vigorous efforts to monitor and reduce this type of risk. We cannot and must not be any less ambitious with regard to markets.

That is why the Commission has proposed a set of specific rules to constrain these players and make them accountable. From now on, they will have to be authorised and supervised by the competent authorities. They will also have to undertake to provide the markets with liquidity.

I offer sincere thanks to Mr Ferber, your rapporteur, for proposing to retain these points and I would also point out that the Commission continues to pursue this debate vigorously beyond the European Union, in international bodies, so that we can achieve a level regulatory playing field and demanding common standards.

Third point: commodity derivatives markets. These are not the same as other financial markets, since their smooth operation touches the daily life of all consumers and, as we know, in some developing countries, involves and concerns the food security of a large section of the population. It seems to me that commodity speculation and the effects that such speculation may have on the food security of a number of countries are totally unacceptable. I would like to express very clearly my support for your proposals, which seek to strengthen your regime on position limits, while at the same time retaining the possibility for commercial undertakings to use these markets when it is genuinely a matter of hedging risk.

Fourth point: introduction of a European regime for the provision of services by third-country firms. In that regard also, I am pleased that our proposal is supported by Parliament. I am convinced that this regime is the best means of ensuring effective regulation of international markets and avoiding any risk of regulatory arbitrage, as I said at the beginning of my speech. This is very important in the context of regulatory convergence at the level of both the G20 and the Financial Stability Board.

Honourable Members, this important debate gives me an opportunity to mention briefly two or three other areas where we should also remain highly demanding in regulatory terms. Firstly, pre-trading transparency. We must be firm and not risk, through specific provisions, allowing certain players to continue trading in an entirely opaque way. The transparency level should be the same, whatever the technology used and whatever the type of investor, retail or professional.

Second area of vigilance: investor protection. We want to, and must, move towards legislation that improves investment conditions by clarifying the role and financial interests of each party. For that reason, mere disclosure of the commissions received by intermediaries would not make it possible, in my view, to ensure the proper level of investor protection, nor, moreover, sufficient independence. I believe the proposal we made to prohibit receipt of commissions for independent advice and portfolio management guarantees more security and independence. These are the only ways to attract sound investors and sound investment. We must also maintain our demands regarding the range of instruments that may be considered non-complex. Making it too broad would amount to increasing the risk that investors would then be sold inappropriate products.

Final point: non-discriminatory access. I am convinced that it is necessary to create conditions for healthy competition in the area of post-trading in order to make financial markets into a genuine single market and prevent excessive concentration of risk within monopolistic market infrastructures.

Honourable Members, Mr Ferber, that is what I wanted to say very openly, in the context of our ongoing dialogue. I appreciated Mr Ferber’s proposals. I confirm to him that I am available, as are my teams, to continue to work and successfully conclude the major piece of legislation that MiFID represents as quickly as possible and on an ambitious, rigorous and demanding basis. It is for us together to find the right balance to attract investor confidence and I have faith in our joint action to reach that goal.

  Holger Krahmer, rapporteur for the opinion of the Committee on Industry, Research and Energy. – (DE) Mr President, my role in this great financial market regulation process is limited to the issue of the extent to which industry is affected by financial market regulation – here I speak on behalf of the Committee on Industry, Research and Energy – since there is a need for financial market regulation, which we are addressing with this directive and regulation package.

However, there is a lot of activism involved in financial market regulation and the Commission’s first proposal on the subject would simply have led, through questions of definition and interpretation, to companies in the real economy – here I am thinking of smaller industrial enterprises such as German public utility companies and agricultural cooperatives – suddenly being treated like banks, for example when they hedge delivery relationships with suppliers and customers on the futures markets. This would have been the collateral damage of financial market regulation and would have been in no one’s interest. In my view it is clear that industrial companies must be treated differently to banks. The majority of futures transactions made by these companies are for hedging purposes, not speculation. Even where these transactions do involve speculation, it must be said that I do not know of a single industrial company or energy supplier that is of systemic importance.

The Committee on Industry, Research and Energy was very clear in its opinion on this subject and I must say that I am pleased that these aspects managed to appear in the final package. To that extent, in the end we certainly did well to include this ancillary aspect.

  Theodor Dumitru Stolojan, on behalf of the PPE Group. – (RO) Mr President, first of all, I would like to congratulate Mr Ferber on the two reports submitted for discussion today. Thanks to the rapporteur’s particularly hard work, these two reports have been supported by all members of the Committee on Economic and Monetary Affairs.

I express my hope that the European Parliament will vote in plenary by a large majority in favour of these two reports. I express this hope because both European regulations will close the regulatory loopholes in the markets where complex financial instruments, such as financial derivatives, are traded.

I would like to underline that in my country, Romania, there was recently a major scandal caused precisely by transactions involving financial instruments in markets lacking in transparency which are not supervised by the authorities. These transactions caused losses to the investors and seriously affected the credibility of Romania’s stock exchange and supervisory authorities, even though the transactions concerned were not subject to supervision and were not linked to the Romanian stock exchange.

Furthermore, investors have extremely limited opportunities to take the people who conducted these transactions to court in those cases where they breached the mandate given to them by investors. This is why I will vote in favour of both reports, so that the markets for OTC instruments and other platforms for trading financial instruments which are not subject to regulation and supervision can become transparent, protect investors’ interests and come under the supervision of the authorities in this sector.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Hans-Peter Martin (NI), Blue-card question. – (DE) Mr President, Mr Stolojan, I have followed your work with interest, and I have a question for you: why did your group, which previously did not see eye to eye with the rapporteur, vote in favour of the provisions of this compromise instead of ensuring that the costs will in fact be passed on to the end consumer? You have done a disservice to the interests you actually represent. How did such an unholy majority arise?

  Theodor Dumitru Stolojan (PPE), Blue-card answer. – I am not quite sure whether I understood the question correctly. I think the proposal for a regulation made by the Commission is good. I am very happy to support that proposal in Parliament.

  Robert Goebbels, on behalf of the S&D Group. – (FR) Mr President, I have 120 seconds to express my group’s agreement with the compromise found. The proposed legislation will, firstly, provide greater transparency and will give the European regulator and national regulators more opportunities to intervene in order to prevent any abusive and harmful speculation.

Consumer interests will be better protected. The keyword will be total transparency of prices and commissions. Under subsidiarity, States will have several additional options, going as far as a ban on retrocession. A review clause will oblige the Commission to monitor developments and propose corrections where necessary. Our proposals will help to erect serious barriers to speculation on commodity markets, particularly for agricultural products. Players in these markets will be obliged to publish their commitments and limits will be imposed on the positions that a player or group of players may hold.

A key element is constraint of high-frequency trading (HFT). Where is the price discovery essential to markets when computers make deals with other computers in milliseconds, microseconds, and, tomorrow, nanoseconds? Speed does not mean more liquidity, Commissioner. In fact, high-frequency trading does not bring any liquidity to the market. Eighty per cent of orders only exist for a few milliseconds. While HFT represents, for some markets, up to 80 % of orders issued, daily trading reports for the major stock exchanges show that orders executed account for only a 20 to 25 % share of total stock market transactions. The fact of placing restrictions on such increasingly elusive speculation will help long-term investors and penalise daily bonus hunters. Financial markets are necessary but must serve the real economy.

  Olle Schmidt, on behalf of the ALDE Group. – (SV) Mr President, thank you, Commissioner. I would also like to thank Mr Ferber for his successful work. This is a very technically complicated legislative proposal, and he has been successful in uniting Parliament with well-balanced compromises. The two legislative proposals form the basis for ensuring that savers regain some of the confidence they lost during the financial crash four years ago.

As has been mentioned, we are tightening the rules relating to high-frequency trading, and not everybody is entirely satisfied. A braking system must be implemented in order to reduce the risk of an uncontrolled stock market fall. We are increasing competition and transparency in the market by establishing a new trading platform, as has been mentioned by the Commissioner. We are ensuring that small bond markets (and I am being a little nationalistic here) such as the Swedish market have reasonable conditions. We are strengthening the protection for savers by tightening the rules on the marketing of savings products, as mentioned by the rapporteur. We are achieving – and this is important to me – greater freedom of choice, improved competition and a more robust and better-functioning capital market.

Mr President, the matter of a ban on commission or inducements has been the most difficult thing to reach agreement over. Self-regulation and ethical guidelines have obviously not been sufficient to reduce the aggressive marketing of savings products. As a liberal, a market liberal, I admit there is a problem here. This I admit, Mr Goebbels.

A general EU ban on commission is the next step if the industry fails to get its act together. However, those of us in the liberal camp do not currently wish to see a complete ban on commission throughout the EU. Countries such as the UK or the Netherlands wishing to have more stringent rules have been allowed to implement such rules. The risk of introducing a complete ban is that sales will lead to those on lower incomes no longer being offered the advice they need free of charge. Small insurance brokers risk being eliminated.

Mr President, financial advice must be available to all citizens at a reasonable cost. Competition and supply must also not be impaired. Transparency and openness are extremely important. This forms an important part of guaranteeing greater protection for purchasers of savings products.

Thank you, Mr Ferber, and thank you to all of the shadow rapporteurs.

  Sven Giegold, on behalf of the Verts/ALE Group. – (DE) Mr President, ladies and gentlemen, firstly, thank you for the generally good collaboration on this report. We have a Commission proposal that has already made great strides in the right direction but could be further improved in key areas.

In the area of market structures there will be more transparency and there will be greater transparency as part of the MiFID in the area of derivatives trading. The resolutions of our compromise in the area of high-frequency trading go much further than what the Commission originally proposed and deserve the support of Parliament in their entirety. The report is moving in the right direction, even in areas that have attracted major public criticism. In the area of commodities and food speculation the report – after, it must be said, many difficult debates – is much stronger than the Commission’s resolutions, since position limits are now established as binding. However, we need further amendments in this area in order to close some gaps. I am hoping for additions through the plenary vote and also in the trialogue. It is pleasing that Mr Barnier has signalled his support of Parliament’s detailed proposal.

However, the report does have weaknesses in the area of consumer protection. That we are now able to ban products is a sign of progress, but we have still made no changes in the area of commission-based advice. The marketing of financial products is still not orientated primarily towards the interests of consumers but dominated by products with the highest commissions. Consumers have lost a lot of money in Germany and everywhere else in the EU. Take open-ended property funds, for example. For citizens in, say, France, Italy, Spain and Germany, our compromise will unfortunately not change very much. The basic principle will remain the orientation of products around commissions. Referring to subsidiarity here is a bit simplistic. I would have liked to see stronger rules here.

  Kay Swinburne, on behalf of the ECR Group. – Mr President, I would like to thank the rapporteur and colleagues for all their hard work on this dossier. One of the most important areas of MiFID is that of the extension of transparency requirements to the non-equity markets. At a time of unprecedented low growth and economic hardship across Europe, I am very glad that all groups in the European Parliament have come together to give strong support to a text that facilitates and supports investment in the corporate bond markets and the government bond markets.

As banks are facing higher capita requirements, businesses need to look elsewhere to raise money and reduce their reliance on bank funding. The bond markets are the perfect place for this, but the market structure in Europe needs to support their needs and new transparency requirements need to be properly tailored to encourage investment. I think the European Parliament text does this and should inform the still on-going Council discussions in a similar way.

I am disappointed, however, that we have not yet managed to reach a political agreement to guarantee the highest possible level of investor protection for all consumers in the EU. While Member States will be allowed to ban all commissions and inducements, I think it is disappointing that the Socialist Group and others have chosen to protect bank business models over that of the end investors.

My own Member State and the Netherlands are already well on the way to implementing a full ban. I can only hope that other Member States will shortly follow. A common misconception is that MiFID is about high-frequency trading and food speculation. We have, however, spent a lot of time discussing investor protection and G20 commitments as well. We have included requirements about minimum tick sizes, circuit breakers, algorithm testing and audit trails, all of which I think put it in the necessary scrutiny measures which do not hinder technological innovation but give safeguards and should therefore give retail and long-term investors confidence that they are not being subjected to unfair practices in the market place.

I hope other groups will support me in the vote tomorrow for the introduction of a requirement to synch all business clocks to one standard. As basic as this sounds, the only way we can have a properly-integrated surveillance system for regulators and market participants in a consolidated tape is if everyone is working to the same clock. At its heart, MiFID is about creating a positive environment for investors, both large and small, and for the companies that need to raise money in our markets.

  Jürgen Klute, on behalf of the GUE/NGL Group. – (DE) Mr President, firstly, I would like to thank my colleagues for the good work they have done together, but especially Mr Ferber. This has really been a very good, fair and open collaboration. It is not always this way, so it is much appreciated in this case. At this point I would also like to thank the non-governmental organisations. They made a significant contribution, especially in the area of food speculation. What may not be obvious, and I want to emphasise this, is that the rapporteur has also engaged in the process. It has not always been easy and comfortable. I do believe, however, that at that point it was very important and good that the non-governmental organisations were involved in working on this area. This process opened up the dry, heavy issue of financial market regulation a little to some of the people, the citizens. It does Parliament good to let such an important issue get out of this House a little.

I echo what Mr Giegold said earlier. We have taken an important and good step in the area of food speculation. However, there are still a few questions with regard to omissions – there may still be a few loopholes there. Nevertheless, this will be revealed by experience and then we will have to re-work this area.

I think that what we have done on high-frequency trading is very deserving of support: I – and, I believe, the majority of my Group – can wholeheartedly support it. This is also not a matter of course, but on that point we have succeeded in creating something good and practical.

On commissions, I can only echo what has already been said. It also seems to me to be a point in need of a little adjustment. However, this process is not so straightforward: tomorrow there will be further amendments proposed. Let us see what the result of that is.

  Roger Helmer, on behalf of the EFD Group. – Mr President, the UK is home to over 36% of the EU’s wholesale finance market. It dominates Europe’s financial OTC trading and has a central role in foreign exchange and interbank money. These two reports represent an attack on that position. Such detailed micro-regulation can only drive up costs and make OTC products less attractive.

Europe’s regulators, who now control these matters, know this perfectly well, and that is why they are doing it. Driving trading back onto the exchanges is the means by which the European Union asserts its control and limits both criticism and independence. The Markets in Financial Instruments Directive (MiFID) report claims it wants to close loopholes. Its impact in the real world is likely to be the opposite. It forces traders to engage in an unceasing arms race with the regulators.

Like water running downhill, trade moves to where it is most free. The EU’s ineptitude and parochialism, at the root of this approach to regulation, can only result in euro-sclerosis and euro-decline. Tragically, these reports are additional nails in the coffin of the City of London’s global position, and they have been deliberately engineered by Paris, Frankfurt and Berlin because they resent the City’s success.

  Hans-Peter Martin (NI). – (DE) Mr President, Roger – Roger – Roger. I mean: please stop this! We did not quite hear ‘Thus spake Zarathustra’, but we did hear ‘Thus spake the City of London’. No – the reverse is true and important: MiFID I, MiFID II – these are abstract concepts that can be fleshed out. Many of us still remember how Commissioner McCreevy kowtowed to the corporate seats in London and explained how everything could be done through MiFID I. Now we see Mr Barnier and, hopefully, a majority here saying ‘never again!’ In the meantime something has happened. Is it EUR 2 or 3 billion that have been lost as a consequence of the opportunities afforded by under-regulation?

Certainly, MiFID is a great step forward – there is no question of that – but there are still a few holes in it. As has already been mentioned, there are still far too many opportunities in the area of OTCs to escape into barely regulated trading venues, contrary to what the G20 specified. Every actor and every financial centre should be able to be controlled appropriately – we have not managed to do this.

The commission issue was prioritised time and again by the Greens, but it is completely inexplicable to me how Social Democrats could end up with something like this. What interests are behind this? Naturally the basic problem of the incentive system remains. If we reward improper economic activities, we reap what we have indeed reaped. For all that, in the area of high-frequency trading we are on the right track – in general it is the right step – but it is still too little.

  Ildikó Gáll-Pelcz (PPE). - (HU) Mr President, first of all I would like to thank Mr Ferber for both of his reports as they contain thorough and excellent work. It became clear during the crisis just how complex and completely untransparent certain financial activities and products have become. New commercial venues and products have appeared extremely quickly, while technological developments such as high-frequency algorithmic trading have also introduced changes into the financial services market. We as legislators have to respond to these in the interests of both citizens and the profession. This is why I welcome the fact that the proposed framework strengthens and harmonises the activities of investment enterprises in this direction as well as the powers of authorities supervising the markets of financial instruments. This also lays particular emphasis on cross-border cooperation.

It is important that the supervisory authorities are capable of handling undesired market influences or even threats. In this respect I firmly support the strong role for the European Securities and Markets Authority as proposed within the framework. We must not forget the risk that high-frequency trading may imply for the liquidity or even efficiency of the financial markets – which is particularly relevant in crisis situations. For this reason I believe the changes that introduce proper organisational security mechanisms for trading locations are important.

In the light of the problems experienced by SMEs recently in gaining access to finance, and assuming that such difficulties will re-emerge when the markets come under stress again, it is high time to establish trading locations that specialise in SME issues. I agree with Commissioner Barnier’s earlier statement that we have to make sure that the financial markets support the real economy, and not the other way round. My congratulations once more to the rapporteur, and I will vote in favour of the report too.

  Pervenche Berès (S&D). – (FR) Mr President, Commissioner, Parliament will, in adopting Mr Ferber’s report, draw important lessons from MiFID I by adopting a text that ensures that almost all financial transactions will have to take place on regulated venues. That is the meaning we must give this text. High-frequency trading, a technique allowing a large number of orders to be executed in a few milliseconds, will now be highly constrained.

The crisis has brought to light the abusive practices linked to the use of high-frequency trading by some financial players, disrupting the functioning of financial markets to obtain considerable profits. The position adopted by Parliament is a move in the right direction by discouraging use of this practice; it will help to put finance back where it belongs, that is to say, serving the real economy and long-term investment.

With this report, Parliament also wishes to tackle food speculation, which can be devastating for entire populations, by introducing position limits for the various players operating on trading venues.

The destabilising effects of commodity speculation are increasingly clear, particularly on foodstuff markets. With this in mind, the proposals adopted today are a first step in the right direction, insofar as they impose limits on positions that may be taken by those operating on trading venues.

This report also allows us to take a significant step forward: the European Securities and Markets Authority (ESMA) will be able to intervene to prohibit the sale of certain financial products acknowledged as toxic to the economy.

In conclusion, I would like to talk about an important point linking the discussion on MiFID I and the text we are going to adopt here. When considering MiFID I, Parliament’s main contribution concerned, the issue of advice that investors, particularly small investors, must be given when undertaking an investment. Financing conditions for such advice remain a point of discussion on which we must provide clarity to ensure that everyone, irrespective of income, may access such advice on terms that are transparent and actually enable them to invest on an informed basis.

  Sharon Bowles (ALDE). - Mr President, when the choice is between either ‘safe’ or ‘maybe it is ok’, we have to opt for ‘safe’. There has been a lot of publicity about commodity derivatives and food speculation; its position management has been too flexible. I have never had any problems with the notion of fixed position limits, as long as in emergencies they can be tightened if cornering happens or varied if a major market position has to be rescued. One day, I remind you again, we will have automated real-time transaction mapping, enabling much better interrogation of data without it being a drag on resources. It would also enable comprehensive, faster monitoring in crucial areas like food speculation, and that is why I pursue openness and FRAND licensing in standards and technology and regret that a little more has not been done in this report.

Good work has been done on consumer protection, clamping down on inducements for giving advice to investors. Citizens need to be sure that they are getting the best advice for them, not being pushed in a direction for the adviser’s benefit. But ultimately a total ban has to be the way forward.

  Francisco Sosa Wagner (NI). – (ES) Mr President, I would also like to congratulate the rapporteur and the other Members who have done a very good job on this reform.

The financial crisis has increased due to the existence of complex and strange transferable securities that are linked to derivative instruments and negotiations outside the official markets, with the aim of achieving high profits very quickly.

We need to attract financial transactions to a transparent market in order to guarantee good forming of prices and competition between transferable products. Above all, however, it is vital that the information provided is understandable to investors, who must have full knowledge in order to freely give consent to the risks they are taking on.

There is no point in transparency shedding light on the situation if confusion regarding the configuration of transferable products blinds the public’s understanding.

  Burkhard Balz (PPE). – (DE) Mr President, firstly I want to thank Mr Ferber for his excellent work. It was not particularly easy, but it has turned out well in the end. The MiFID Financial Markets Directive is the basis for European financial market regulation and I am very happy that the European Parliament has taken such a clear, strong position through its revision of the MiFID Directive. Once again we are well ahead of the Council. The MiFID will improve the market structures, speed up trade, reduce systemic risk and, above all, reinforce the protection of investors. The European Securities and Markets Authority will also grow into its role. All in all this will make the financial markets a little safer.

I would like briefly to raise the issue of investment advice. The Committee on Economic and Monetary Affairs has voted clearly on this issue. Europe has many kinds of models for advice: commission-based advice, transferred commissions, fee-based advice – regardless of the model, each one has its advantages and disadvantages. The categorical condemnation of a specific model will get us nowhere. I also support the stance of the Committee on Economic and Monetary Affairs calling for more openness and transparency but not banning any one model as such, since the quality of advice is not guaranteed when the advisor is only remunerated with a fee. There are certainly enough citizens who have been dissatisfied with the work of fee-based freelance advisers.

Perhaps we should turn the debate on its head: what about financial education? An initiative for the study of economics and finance in schools and vocational colleges would certainly contribute to improved investor protection.

  Arlene McCarthy (S&D). - Mr President, I want to thank Mr Ferber and the shadow rapporteurs for making substantial and innovative improvements to the Market and Financial Instruments Directive. But I want to focus in 90 seconds on two minor but highly significant areas where the citizens of Europe are demanding that we go further than the compromises that are on the table on investor protection and excessive speculation on the commodity markets.

Across Europe, consumers have been victims of the mis-selling of investment advice because of this perverse incentive in the commission inducement system which creates a bias towards products paying the highest level of commission and away from the best interests of the client or the investor. Studies by the German Institute of Consumer Policy show that disclosure and transparency do not work. There is clear evidence that consumers do not trust the independence of the advice if inducements are paid to push a particular product. So a ban is the only way to remove this conflict of interest and give strong protection to the investor.

Many Member States – the Netherlands, Finland, Denmark, Sweden, Belgium – have recognised this and are in the process of introducing a ban. The option of a ban will not protect consumers. In fact this option is encouraging former investment bankers and Conservative Members of the UK Parliament to scrap the ban introduced by the Labour Government. I urge Members to support the ban that has been put down by myself, the Greens and several other groups.

On excessive commodity speculation, let us end the situation and close the loophole whereby during the famine in the Horn of Africa, the World Food Programme paid EUR 50 million from UN aid to one large commodity trader, Glencore, for wheat it ordered to feed the poorest and hungriest population in the world. This is immoral and unjust. We should vote for Amendment 3 by the Greens, which I co-signed.

  Sylvie Goulard (ALDE). – (FR) Mr President, Commissioner, I would like to say very quickly that I believe that Parliament is doing its job with the Commission – and soon, I hope, with the Council – in a difficult area, and to thank the rapporteur, who has done a very considerable amount of work with the shadow rapporteurs. It is an area where, in my view, one must be careful not to court public opinion.

Sometimes, outside, we are asked: what are you doing to regulate financial markets better?, and people underestimate what has been done. Nor must we give the idea that we are able, with a wave of a magic wand, to transform finance completely, to the extent required. A balance has been struck between transparency and optimum organisation. It is important to defend the rights of the consumer. There are still some slight differences of opinion between the above groups but, in any case, there is genuine agreement on saying that consumers must be better protected and also on protecting access to financing for small and medium-sized enterprises.

These are, therefore, complex issues. We will continue working. In my view, Commissioner, it is a big job, which forms part of an even vaster whole.

For my part, I also welcome the fact that the supervisory bodies, which we have helped to put in place together, are themselves also able to exercise more far-reaching competences in that area.

  Thomas Mann (PPE). – (DE) Mr President, Commissioner Barnier, the MiFID II Directive, is a genuine milestone on the path to more efficient financial markets. Effective supervision must be established in order to ensure that all financial actors play by the rules. Quite rightly, the excellent report by Mr Ferber stipulates improved investor protection. We must prevent customers from exposing themselves to major risks through incorrect advice. Through provision of all the required information, they will be able to choose the most beneficial investment strategy for them. Products with a high factor of speculation must be clearly identifiable from the outset.

Clearly, high-frequency trading must be more strictly regulated. We must put a stop to such transactions, which are carried out at the speed of sound and involve no business worth mentioning. The planned minimum holding periods of 500 milliseconds for orders are correct. They ensure that the continual placing and cancelling of orders will be limited to a minimum. If orders are cancelled before execution only in order to push prices higher, traders must be politely asked to pay up.

I welcome the compromise reached on position limits, i.e. on the maximum limit of high-risk financial contracts held. It enables speculation on raw materials, which is getting out of hand, to be channelled in a reasonable direction. There is no doubt that we need raw materials in order to supply our industries with the resources they need for production. What we absolutely do not need are bets that drastically push food and production prices higher. Clear limits must also be set here.

  George Sabin Cutaş (S&D). – (RO) Mr President, back in 2009 the High Level Group on Financial Supervision chaired by Jacques de Larosière underlined the importance of stricter regulation of the financial system. Today, the compromise text on financial instruments represents an important step towards both greater transparency of high-frequency trading and the elimination of agricultural produce speculation.

In July of this year we witnessed a 10 % rise in food prices, which was to a large extent caused by speculative activity. The United Nations Food and Agriculture Organisation has requested global coordination of efforts to tackle raw material speculation, underlining the harmful effects of this kind of behaviour on price volatility and stating that the latter has moved at an alarming pace since 2007.

At the same time, high-frequency trading, which unfortunately represents a significant component of the financial markets, has caused instability and serious losses to the European economy. In this context, I wish to express my support for a report which will make it possible to increase the transparency and efficiency of the financial markets.

  Werner Langen (PPE). – (DE) Mr President, I seldom have the opportunity to praise Mr Ferber in a plenary session as highly as I can today, since he has done very good work. The compromise position he has produced, which has been accepted unanimously, is the result of multifaceted negotiations. Very well done.

I have three points to make. The first is on the issue of position limits. The solution that has been found, which is obviously still being attacked from without, is the right way: we must not throw the baby out with the bathwater and make the negative side-effects for agricultural trade, which this solution certainly contains, responsible for world hunger. If we resolve position limits as Mr Ferber suggests, we are on the right track.

My second point concerns the compromise position on banning commissions, which was tabled at the last minute. As currently formulated, this could change the market considerably. As rapporteur for insurance mediation, I would preferred it if, in this position, this issue had been left to the Member States, since there are different systems. To write that commissions should be banned across the board goes too far for me, since it will entail a process of vertical concentration.

Thirdly, high-frequency trading: it has already been mentioned that there are many people in the sector who are against the compromise position. However, I think it is right that high-frequency trading should be slowed down, otherwise in the future computer systems and powerful computers will manipulate the financial market even more than before. Further work, which was not possible in MIFID, needs to be done on this, but the rapporteur will be able to achieve something more in the pending negotiations.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Sven Giegold (Verts/ALE), Blue-card question. – (DE) Mr President, Mr Langen, are you aware that the compromise position as it stands does not, I am sorry to say, entail any major changes to the majority of commission-based advice? The transparency requirements in this area are essentially the same as in MiFID I and only apply to independent financial advisers, of which there are hardly any in Germany. Only there is a ban on commissions being demanded. In every other area, commission-based advice, which to a large extent has led to bad investments, will continue. Are you aware that, according to your own view, you are actually criticising Mr Ferber unfairly here?

  Werner Langen (PPE), Blue-card answer. – (DE) Mr President, I did not criticise Mr Ferber. This is a compromise position, which the Group of the Greens/European Free Alliance obviously did not cooperate on, or were not prepared to cooperate on, because their maximum demands were not met. It may have sounded as if the following had been stated: ‘… Member States can ensure that investment advice may or will be banned …’

I would prefer to leave this to Member States’ discretion and not leave it as stated here. Here is a very clear statement: ‘… Member States shall ensure that … is banned’. I do not understand why the Greens are not cooperating on this. I am not criticising Mr Ferber, I am criticising the Greens, who want much more than is possible.

  Hermann Winkler (PPE). – (DE) Mr President, ladies and gentlemen, we all know that shares losing almost their entire value in milliseconds, billions of dollars suddenly going up in smoke is not science fiction – unfortunately, this is the reality of today. Nowadays trading happens so fast that you cannot time it on a watch. The damage to national economies is huge. If we can still change something, we should try. Many citizens are sitting at home pondering the same question as I am: what possible economic benefit outweighs the huge risks of speculation? This development must be controlled as far as it is within our power to do so. This was one of the reasons for revising the directive.

The solutions put forward by the Committee on Economic and Monetary Affairs are minimum holding periods for trade, higher fees for too many cancelled orders, new capacity controls on the system and emergency provisions, e.g. the possibility of an EU-wide trading suspension. Through this planned legislation we will do something do curb these kinds of risks to the national economies.

What about consumers? What do they actually get out of our regulations? The directive should not only control high-frequency trading but also protect private investors better in the future. What investor has not had the feeling that he or she is being pushed by his or her investment advisor towards a certain product which, in hindsight, is more beneficial to the advisor than to the customer? Hence my point that we must create more transparency: customers must be sufficiently and transparently informed about whether advice is given for remuneration and what fees are associated with it. Customers should in future receive a full account of costs and information on the entire spectrum of products. Furthermore, every product – old as well as new – should be examined each year to see if it is really in customers’ best interests.

That brings us to the subject of commissions. According to the committee, commissions should only be allowed if they are passed on to customers, are necessary to supply the product (e.g. taxes) or if customers are informed of the fees. Member States may at present decide for themselves whether commissions are totally banned. We do not need to regulate this across the EU.

IN THE CHAIR: GEORGIOS PAPASTAMKOS
Vice-President

Catch-the-eye procedure

  Elena Băsescu (PPE). – (RO) Mr President, the economic and financial crisis has emphasised the shortcomings in the activity of the financial markets, and their development has highlighted the need to strengthen the regulatory framework for the financial instrument markets.

I would underline that a global regulatory framework guaranteeing higher quality in the conduct of transactions is needed. Its expansion is justified by the greater complexity in the range of services and instruments, which has meant that investors are resorting to this type of market with increasing frequency. I believe that this will make it possible to preserve the integrity and efficiency of the financial system.

I would like to draw attention to the fact that trading activities must be pursued at regulated locations and must be defined by complete transparency; these criteria should apply to all types of trading locations.

  Inês Cristina Zuber (GUE/NGL). - (PT) Mr President, the European institutions are still talking emphatically about partial aspects of financial regulation, in this case as regards the commodities markets. Yet does this approach fulfil the expectations that the European Commission itself created when from 2008 on it admitted the end of derivatives themselves? In our view, it obviously does not. It is clear that the fight against financial speculation falls well short of what is needed and cannot be tackled partially. What would be socially and economically fair would be to declare all-out war on the speculation system itself, attacking not just the form, but also the content.

In this regard, we must not conceal the heart of the matter. What we need is to call for an end to the derivatives market and tax havens and have truly effective control by politicians of the financial world. Everything that is being done here amounts to nothing more than placing a miniscule spanner in the works, which will fundamentally keep operating.

(End of catch-the-eye procedure)

  Michel Barnier, Member of the Commission. − Mr President, I will come straight back to the comment just made by Ms Zuber.

Ms Zuber, it is necessary to be objective; these are not partial responses made by the Commission, Parliament or the Council. We are dealing with every product, every sector, every financial player. For the more than two-and-a-half years during which I have had the honour to be Commissioner and to work with many of you, we have constructed – Ms Zuber, you have to look at things objectively – 28 texts under the heading of regulation.

If you put them together, as they are in this table, and explain matters to your constituents, it must give you the proof that we are dealing with the effects of, and learning the lessons from, the financial crisis, that we are doing the job. It is not just the Commission that is doing the job, but you, also, are doing the work as an MEP. Say it! You have reasons to be proud of the work done by all honourable Members on our proposals for learning from the crisis and, ultimately, doing what people expect, that is to say, making the financial markets, which we need – Ms Goulard was right to say so – serve the real economy once more, rather than themselves, as they have been allowed to do for 15 or 20 years.

I say that because it is not something small, no tiny grain of sand, that Mr Ferber’s report offers you based on our proposal. Mr Krahmer, Ms Gáll-Pelcz and Ms Goulard indeed talked about the real economy. Your proposal, like the one I am presenting, pays great attention to the needs of the real economy and to small and medium-sized enterprises. Firstly, by putting in place financial markets which are healthy, transparent, efficient and useful in financing the real economy, to avoid what Mr Stolojan referred to as a problem in his own country, for instance, and to respond to the need for credibility, transparency and consumer and investor protection. At the same time, we are also taking specific measures on SME access to financial markets.

Honourable Members, I would point out that, here in Europe, the economy is financed 75 % by the banks and 25 % by the financial markets. That is in inverse proportion to the United States, where it is the financial markets that finance 75 % of the economy. In Europe the figure is 25 %, and even less for small and medium-sized enterprises. I wish to state my intention to continue working on specific measures on financial market access for small and medium-sized enterprises, with carefully calibrated exemptions, in particular for industrial investment. I think of what we have done, for example, with Mr Langen for the European Market Infrastructure (EMIR) and what we are doing for SMEs with Mr Karas on banking regulation.

Mr Goebbels pointed out that this text has a review clause. It is also extremely important to remember that, for most of the texts I present to you, I support this idea of a review clause. In fact, as you said, Mr Goebbels, but also as pointed out by Mr Winkler, Ms Gáll-Pelcz and Ms Băsescu, we have to contend with highly effective and imaginative financial markets, which exploit not just technology but sometimes also loopholes in global regulation (and there are some) and which move very fast, much faster than us and much faster than democracy. That is why, as pointed out by Mr Goebbels, rendezvous clauses are needed to check, adapt and improve our texts.

I would now like to say a word on a subject that is very important to me. You know that I was Minister for Agriculture in my country. I had the opportunity to give my opinion on what Ms Swinburne referred to, namely the growing financialisation of transactions on agricultural markets compared with physical markets. Such financialisation has increased exponentially over the last few years, with greater volatility in that area which naturally brings with it numerous additional speculation risks.

That is why, like Ms McCarthy, Mr Schmidt, Mr Klute, Mr Goebbels, Mr Langen, Ms Berès, Mr Mann and Mr Cutaş, I want to state my support for your rapporteur’s proposals, which you have supported unanimously, to further demonstrate – I am speaking now to Mr Giegold – that Commission proposals can always be, and often are, improved or strengthened.

I do not know everything; I do an honest, pro-active and generally ambitious job. Sometimes too much so, I am told, if I listen to certain lobbyists – but that is as much as I listen to them. I want to say that, happily, Parliament improves many texts. That is particularly true for this issue of position limits, where we see clearly that high-frequency trading must be constrained. I have not heard any proposals to prohibit high-frequency trading. I maintain, Mr Goebbels, that it has some benefit in terms of price formation but must be constrained and regulated. Certain abuses must be prevented.

That is precisely what, together, we are going to propose. I will be looking very closely, for instance, at what happened in May 2010, at the time of the US crash. Indeed, what took place is still not very well understood, even two years later. Therefore, this principle of responsibility was needed and we will see, with the review clause, whether that is enough.

In any case, echoing the remarks made by Ms Bowles, your Chair, I want to point out that the proposals you are preparing to approve in order to place very strict constraint on position limits – and I would very much welcome it if all other G20 partners, especially the United States, could confirm their determination to do the same – are backed – honourable Members, I am giving you this information – by IOSCO, the International Organization of Securities Commissions, which just stated in a report that this is the direction to take.

I would like to respond, Mr President, if I may, to several of your colleagues – Mr Schmidt, Mr Balz, Mr Sosa Wagner, Mr Giegold, Ms Swinburne and Ms Berès – on the issue of commissions. We sought the right balance. Retrocession must be regulated and prohibited where necessary.

In fact, we provided for such a ban in two very specific instances: independent advice and portfolio management. In both cases, being remunerated by the provider of the products sold is, I think, wholly irreconcilable with an ability to provide the independent service the investor expects. I am conscious, honourable Members, of the changes that such a ban may entail in certain markets. That is why the Commission’s proposal retains the option for investors to take non-independent advice if they so wish.

Lastly, I would point out that in another text, Packaged Retail Investment Products, PRIPs, we have also, and in parallel, strengthened and simplified the information available to all individual investors, in particular, and to which they are entitled.

Mr Helmer pointed out the importance of the City of London. I think that the fact we have, in the City, such an important location for the financial markets is an opportunity, not just for the United Kingdom but for all of Europe, and I do not see, Mr Helmer, how the fact of strengthening transparency and promoting healthy markets, as MiFID seeks to do, could be seen as an attack on London. Or I have lost the plot!

I have always thought and observed that those managing the City and the UK Exchequer supported the effort we are making together in favour of the single market in financial services, transparency and promotion of healthy markets. Please tell me if I am wrong, Mr Helmer.

Moreover, Mr Helmer, an advocate of liberalism, will allow me to remind him – I am speaking from memory – of what was said by Adam Smith, the person who inspired great liberal thinking: ‘There is no market in the absence of rules and in the absence of moral conduct on the part of its own actors’. There is no market in the absence of rules, or in the absence of moral conduct, Mr Helmer, for actors in these financial markets. That is what we are in the process of restoring by learning the lessons from the crisis.

Mr Martin, we are indeed in the process of learning the lessons from the crisis and also acting to ensure that account is taken of the will of the people, who no longer want to pay the costs of regulatory arbitrage and a certain irresponsibility.

All in all, honourable Members, we need financial markets – I reiterate what Ms Goulard said, we need markets which are secure, transparent and perhaps, in the home stretch, Mr Ferber, we will be able to look at whether, in the detail, we have indeed closed all the loopholes to leave the least possible opportunity for regulatory arbitrage and be certain, in terms of all the details, that this requirement for transparency, but also traceability, is indeed present.

That has been our goal with Mr Langen for the European Market Infrastructure Regulation (EMIR) text and, lastly, I would like to say a word of thanks to Ms McCarthy for the work she did on the report just adopted on another directive forming part of this set on sanctions, including criminal and administrative sanctions for market abuse.

In conclusion, we are working for the real economy. We want to make financial markets serve the real economy once more and, in all the texts we are working on together – MiFID today – capital requirements for solvency, pension funds, we must have this concern for the real economy and long-term investment. That is also why I am going to start a debate by means of a green paper not only on how to avoid penalising long-term investment and the real economy but also to on how to encourage them. I would, moreover, from that angle, support Mr Balz’s proposal on financial education, which is a very important point and one we should develop in various ways.

Lastly, I would like to say that your unanimous expression of thanks to Mr Ferber, your rapporteur, is well deserved, given the complexity of this text, which is a cornerstone of this regulatory agenda. To your thanks, I would like to add my own, and add that we are ready to complete the home stretch in the coming weeks.

  Markus Ferber, rapporteur. – (DE) Mr President, ladies and gentlemen, I will be brief. Firstly, I am pleased that I have such wide support, from the extreme left to the extreme right. I do not know whether this is a good thing – but perhaps it is helpful to have found a compromise in the middle.

Secondly, I want to point out here that we are talking about financial market regulation. Therefore, it depends on which markets trading takes place on. Trading in financial products always involves risk: there is no such thing as a risk-free financial market. If you demonise financial markets per se, you will be unhappy with any regulation. This was not our intention. It was our intention, on the one hand, to ensure that every trade in financial products takes place within a regulated framework and, on the other hand, that these financial markets generate added value for the economy and do not exist purely for their own sake. If we have anything to learn from the time before 2008 it is that financial markets acted independently and did not generate any added value for the real economy – this has been the painful experience of recent years. As a result, we have produced something together.

My heartfelt thanks, therefore, go to all the shadow rapporteurs who collaborated on this report. We will have the privilege of holding meetings with the Council over the coming months in order to produce a good result. I hope that we can take the good spirit we have maintained in discussions over almost a year into those negotiations.

  President. – The debate is closed.

The vote will take place tomorrow, Friday 26 October 2012, at 11.30.