The new directive and regulation, which take effect from January 2018, revise the EU's framework for markets in financial instruments. The directive aims to strengthen regulatory framework with measures to make sure trading takes place on regulated platforms, introduce rules on trading by computer algorithms and enhancing investor protection.
The EU's reforms are an "innovative package" that will increase transparency for investors as well as increase the type of data about financial market transactions available to regulators and supervisors, Professor Fabrizio Carmignani, Dean at Griffith Business School (Australia) told Radio Sputnik.
"The purpose is to create a market that is more transparent and therefore opens better opportunities to investors."
A more transparent market provides investors with more information with which they can make more informed decisions, increasing the efficiency of the market, Carmignani explained.
"They can understand better how their money is being used, they can understand better how asset managers are conducting their transactions so investors will have more information to make better decisions."
European financial markets have good growth potential and the reforms will make them more attractive to investors in the long run, who could be tempted to trade in Europe rather than the US.
"This is the ultimate outcome of these reforms, it will make the market more attractive even though during the short term adjustment period some clients and operators might decide to switch their operations to another market. But in the long term, I expect the European markets might become even more attractive thanks to these reforms."
"It is indeed a rather competitive game and because of the advances in financial technology, transactions can be switched across markets pretty quickly. So the US market will have to face this increased competition."
