Europe Pushes Ahead on Long-Awaited Capital Markets Union

(Bloomberg) -- The European Union moved forward Thursday on trying to build a cross-continental financial system with four new legislative proposals, six years after it was first announced and a year after the latest relaunch.

The EU’s executive arm hopes a “capital markets union” will break down barriers between 27 national financial markets and rulebooks to help companies raise money within the bloc. 

After years of slow progress, finance firms have urged the EU to deregulate more quickly and boost Covid-battered businesses while competing with rival markets such as London -- which was the EU’s largest financial hub until Brexit took effect this year.

The bloc announced: 

• changes to the Markets in Financial Instruments Regulation that would help create data feeds from across several trading venues, known as a consolidated tape. The long-awaited project is intended to give a better view of market conditions throughout the bloc
• a review of the Alternative Investment Fund Managers Directive that aims to add some investor protection while leaving cross-border delegation largely in place
• reforms to allow the public to view financial details of European companies and investment products through a single access point
• changes to European long-term investment funds to make it easier for firms to set up and market these products, particularly for retail investors, after initial adoption rates were sluggish
• plans to ban payment for order flow, echoing moves in the U.S. to stem a practice that hit the headlines during the meme-stock mania.

The initiatives need to be agreed and adopted by the member states and the European Parliament. The proposals build on plans trailed last year in the bloc’s package of reforms to boost the economy after the pandemic.

The package unveiled Thursday also spelled the end for “open access” reforms, which would have let banks trade and then clear derivatives through separate venues -- an option that London’s main exchange had championed, while European bourses were critical. The change had already been delayed during the pandemic. 

The goals of the capital markets union predate Brexit and haven’t changed since the U.K. left the bloc, Valdis Dombrovskis, the EU’s trade commissioner, told reporters. “But it’s clear that the fact that the EU’s largest capital market has in between left the EU clearly adds a sense of urgency of our need to develop our own capital markets.”

The Commission also has plans to relax some listing rules for companies raising money on EU public markets, which will be set out in a legislative proposal in the second half of 2022. It will also work on the long-awaited harmonization of corporate insolvency rules next year, although this will depend on ongoing discussions with member states and the European Parliament.

©2021 Bloomberg L.P.