00:00 GMT +323 October 2019
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    EU 'Catches Up to US Financial Market' With New Trading Reforms

    © AFP 2019 / ERIC PIERMONT
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    New EU rules governing investment services are intended to make European financial markets more competitive and will make it a more formidable competitor to the US, currently the world's leading center for investment services, Professor Fabrizio Carmignani of Griffith University told Radio Sputnik.

    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."

    "At the same time, I think it's very important to remember that [with] these reforms, there will also be more information for regulators, for agencies that regulate the market and for agencies that supervise the market. So, hopefully this improvement in data available to the regulators will also guarantee a bit more stability in the market."

    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."

     Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, January 17, 2017
    © REUTERS / Staff/Remote
    Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, January 17, 2017
    "In theory, with the European market catching up, in terms of regulations, with the US market, the European markets will become even more of a stronger competitor for the US market. So, there might be some long-term relocation of transactions from the US market to the European market. We also have to consider that other markets are emerging and in the future will continue to attract more business."

    "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."

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