EU offers to match UK move to boost trade in ‘dark’ stocks, documents show


LONDON, Oct 21 (Reuters) – A curb on “dark” or off-exchange trading in shares in the European Union should be removed altogether to better compete with Britain, EU documents seen by Reuters showed on Friday.

The documents set out the latest compromises between EU states on reforming the bloc’s “MiFID” securities law to catch up with advances in technology and business practices in the markets.

The documents also include an informal German proposal to remove the European Commission’s proposed ban on payment flow for orders, or when brokers receive a commission for directing stock orders to a specific trading venue.

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Dark trading has long been divisive in the EU, pitting banks and big investors, who favor this form of anonymous trading, against exchanges who say it hurts prices on their “enlightened” platforms, which display prices at which players market are ready to trade.

Dark trading is currently subject to two types of volume caps, and the European Commission has proposed removing one of them.

EU states and the European Parliament have the final say on the MiFID reform proposal, with negotiations set to continue over the next few months before a final deal emerges.

The Czech EU Presidency is proposing the complete abolition of the double volume cap, EU documents for next week’s meetings show.

“This will allow for a dynamic and agile approach, allowing price formation, sufficient transparency and flexibility to react to situations within the EU (or UK),” the documents say.

Britain, now outside the EU, has said it will also remove the bloc’s inherited dual volume cap as it seeks to boost black trade to attract more international investors to the financial hub of London, now largely cut off from the EU.

“LEAST AMBITIOUS”

Exchanges are also pushing to water down commission proposals for near real-time feed of stock trades to give investors a view of market-wide prices.

The presidency supports the establishment of the so-called consolidated band, but documents show that a fierce haggling took place, referring only to completed transactions and dropping the mention of also including the prices of proposed transactions.

“The presidency would like to take this opportunity to reiterate one last time that this version of the CT actions is probably the least ambitious and the least attractive, which can still remain a viable product,” EU documents say.

The presidency also proposes to clarify that a threshold of 30 billion euros for requiring investment firms in the EU to apply for a banking license refers to assets inside the bloc, according to the documents.

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Reporting by Huw Jones; Editing by Paul Simao

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