EU executive says jury out on share trading rules

Two-year old European rules aimed at sparking competition in share trading have cut costs for investors but it is too soon to say if changes areneeded, the bloc's executive body said on Wednesday.

The European Commission will review next year a set of rules known as markets in financial instruments directive (MiFID) introduced in November 2007.

Exchanges say the rules have fragmented markets to the detriment of share prices and that upstarts don't have to abide by many of the tough MiFID requirements. The many new trading venues and banks say MiFID has boosted competition and choice for investors.

"MiFID has been very successful as an instrument to promote competition but the question is whether it's successful inproviding a level playing field" Emil Paulis, a senior Commission official, told a Federation of European Securities Exchanges (FESE) conference.

"We will want to wait to get the data. I think the jury is still out" Paulis said.The review will look at whether to extend disclosure requirements to other assets such as fixed income and derivatives and examine best execution or the pledge a broker must make to scour markets for best prices, Paulis said.

The Committee of European Securities Regulators (CESR), which groups national market watchdogs from the 27 EU states,will discuss "dark pools" or anonymous, off exchange trading venues, which exchanges say can evade some of MiFID's transparency rules.

CESR Chairman, Eddy Wymeersch, said a key solution could beto have a consolidated tape of share prices from all the trading venues so there is more efficient reporting of market activity.

Technology could also play a role.

"What I would like to see is a more intelligent routing system" Wymeersch said, referring to super fast links from brokers to all trading venues so that a broker can easily spot the best price across the entire market. 

Investors should protest more loudly that their brokers equip themselves with such order routing systems, Wymeersch said.

"We should try to have a system where all the different venues are linked to each other" Wymeersch said.

CESR is also looking at whether to extend MiFID rules to the bond market, he added.