A TOP European Parliament committee voted unanimously in favour of rules to cut down high frequency trading yesterday, and move forward plans to limit the number of positions market participants can hold.
MEPs claimed the markets in financial instruments directive (Mifid2) will promote market stability by forcing traders to place orders in markets for at least half a second.
But analysts said the new rules will raise costs for firms and consumers, limit competition in financial markets and reduce global trade.
Sharon Bowles, the Lib Dem MEP who chairs the economic and monetary affairs committee (ECON) that voted on the plans yesterday, believes the move will reduce market volatility.
“We are clamping down on so-called ‘food speculation’, by imposing hard limits on how many contracts or positions one market participant can hold at a time, which will promote stable conditions and prevent market abuse,” she said. “In addition, rigorous checks by national and European authorities will be enforced on those who have a real interest in the physical commodity and carry out genuine hedging.”
However, analysts said the extra regulations would add costs to firms like utilities, which will end up being paid for by consumers, as well as driving trade out of the EU.
“The proposals seem likely to lead to major restructuring of trading and customer risk management operations in commodity firms, including the curtailing of activity and customer offering in certain areas and potential relocations to Switzerland or Singapore.” said Robert Finney from law firm Holman Fenwick Willan.
He said many non-Europeans will no longer be able to access EU markets, hitting global trade.