EP backs tougher rules for dark pool regulation

12 November 2010

The European Parliament (EP) is backing a report calling for greater regulation of high frequency trades and dark pool trading platforms.

According to reports, the EP is adopting many of the main points in a study by Kay Swinburne, the European Conservatives and Reformists economics expert.

The report calls on more clarity surrounding alternative investment platforms such as dark pools and over-the-counter derivatives (OTCs) as part of a wider bid to reduce risk exposure within investment markets.

Dr Swinburne said: "Today the Parliament has clearly shown its concern for the integrity of our financial markets, and is asking the fundamental question: is the market still serving the needs of long-term investors and businesses?”

She stated that high frequency trading is an investment area which also requires more transparency and regulation.

Regulators for the financial services industry in both the US and Europe are currently looking at how reporting procedures surrounding trading can be improved.

The EP is currently compiling data to be included in the second part of the Markets in Financial Instruments directive (MiFiD), an initiative aimed at providing more regulation to traders following the original version of MiFiD in 2007.

In the US, the Securities and Exchange Commission (SEC) is compiling new legislation to regulate trades following the flash crash of May 6th 2010.

Earlier in the week it announced plans to ban stub quotes as part of improvements to trade regulation.

By Jim Ottewill

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