EU executive to propose major markets law

By Huw Jones

LONDON (Reuters) - A major draft EU law on market infrastructure will be tabled next July to make share and derivatives trading less risky for investors and the broader financial system from late 2012, industry sources said on Monday.

The European Market Infrastructures Directive will focus on reducing risks between the two sides of a share and derivatives transaction so that fallout from default is ringfenced.

The European Union's executive European Commission has already announced broad plans for new rules but details are now emerging on content and timing.

It wants the new law to take effect from the end of 2012 -- an ambitious deadline for such a sweeping law, the sources said.

The Commission is part of global efforts led by the G20 group of countries to apply lessons from the credit crunch by shining a regulatory light on hitherto opaque parts of the market such as derivatives.

A spokesman for EU Internal Market Commissioner, Charlie McCreevy, had no comment on the plans for a draft law, saying it was a matter for the incoming Commission.

Former French foreign minister Michel Barnier, whose country traditionally takes a hard line on financial regulation, is expected to take charge of EU financial services in the new commission that is now being put together.

The bloc's financial industry already faces a welter of draft EU rules now being adopted, ranging from hedge fund registration to tougher bank capital requirements and fundamental changes to supervison.