BRUSSELS: The European Commission presented new plans to clamp down on financial speculation on Wednesday, Dec 8, proposing tighter controls on everything from betting on the price of commodities to high-frequency trading.
In a review of legislation governing the financial instruments that many blame for plunging the global economy into chaos, EU officials want to curb speculation in areas such as government bonds trading, or commodities such as grain.
Michel Barnier, the commissioner in charge of EU financial reform, wants to beef up the powers of regulators to intervene when speculative positions in specific financial markets send grain prices spiralling, for example.
He will also tackle high-frequency trading, the millisecond buying and selling by computers of stocks and bonds that is suspected of triggering the flash crash in July, when U.S. stock markets plunged only to recover within minutes.
As part of Wednesday's proposals, the Commission, the EU's executive, also launched a push to raise penalties across the region for financial crimes such as insider trading, and to force national regulators to name and shame offenders.
"This reform has been overdue because the markets broke down in the same way as banks did," said Sony Kapoor, a financial expert with London think tank Re-define. "So far the whole effort has focused on banks."
"No one knows what is going on in the markets in Europe. They are playing catch-up with the United States. Regulators there already know more about how the markets work."
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HIDDEN RISKS
The Commission is leading a shake-up of financial services across the 27-country EU after what began as a freeze in bank lending led to recession, widening budget deficits and ultimately sucked whole countries into a debt crisis.
Its proposals will need the backing of the European parliament as well as powerful EU member states such as Germany and France, and could become law in 2012.
Although there is broad support for tighter controls on financial speculation, much of the success of the EU reform of finance will depend on strengthening the power of a trio of new watchdogs to monitor markets, banks and insurers.
In Wednesday's proposals, which outline the shape of future European law, officials write of their desire to tackle "potential new risks that increased use of automated and high-frequency trading could pose to EU markets".
On commodity trading, the Commission wants traders to disclose their positions and allows regulators to "intervene at any stage in trading activity".
The rule change will also demand more information for regulators about trading prices in so-called "dark pools", where the price of a deal is published only after it has happened.
Politicians have repeatedly blamed financial speculators for causing the crisis, but officials in Brussels are grappling to understand whether they really played a role.
A recent internal study failed to find a link between a government's cost of borrowing and swings in the price of insuring against debt default through credit default swaps -- an area that had been identified as a cause of concern. - Reuters
In a review of legislation governing the financial instruments that many blame for plunging the global economy into chaos, EU officials want to curb speculation in areas such as government bonds trading, or commodities such as grain.
Michel Barnier, the commissioner in charge of EU financial reform, wants to beef up the powers of regulators to intervene when speculative positions in specific financial markets send grain prices spiralling, for example.
He will also tackle high-frequency trading, the millisecond buying and selling by computers of stocks and bonds that is suspected of triggering the flash crash in July, when U.S. stock markets plunged only to recover within minutes.
As part of Wednesday's proposals, the Commission, the EU's executive, also launched a push to raise penalties across the region for financial crimes such as insider trading, and to force national regulators to name and shame offenders.
"This reform has been overdue because the markets broke down in the same way as banks did," said Sony Kapoor, a financial expert with London think tank Re-define. "So far the whole effort has focused on banks."
"No one knows what is going on in the markets in Europe. They are playing catch-up with the United States. Regulators there already know more about how the markets work."
''
HIDDEN RISKS
The Commission is leading a shake-up of financial services across the 27-country EU after what began as a freeze in bank lending led to recession, widening budget deficits and ultimately sucked whole countries into a debt crisis.
Its proposals will need the backing of the European parliament as well as powerful EU member states such as Germany and France, and could become law in 2012.
Although there is broad support for tighter controls on financial speculation, much of the success of the EU reform of finance will depend on strengthening the power of a trio of new watchdogs to monitor markets, banks and insurers.
In Wednesday's proposals, which outline the shape of future European law, officials write of their desire to tackle "potential new risks that increased use of automated and high-frequency trading could pose to EU markets".
On commodity trading, the Commission wants traders to disclose their positions and allows regulators to "intervene at any stage in trading activity".
The rule change will also demand more information for regulators about trading prices in so-called "dark pools", where the price of a deal is published only after it has happened.
Politicians have repeatedly blamed financial speculators for causing the crisis, but officials in Brussels are grappling to understand whether they really played a role.
A recent internal study failed to find a link between a government's cost of borrowing and swings in the price of insuring against debt default through credit default swaps -- an area that had been identified as a cause of concern. - Reuters
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