Regulators start review of EU share trading rules

By Huw Jones

BRUSSELS (Reuters) - Market watchdogs began reviewing on Monday whether a set of European Union share trading rules need amending in light of the financial crisis and criticisms that prices have become fragmented.

The Markets in Financial Instruments Directive or MiFID was introduced a year ago with the twin aims of boosting competition and improving investor protection through greater transparency.

The framework is the biggest industry upheaval in decades as it tears down barriers to cross-border trading.

But brokers have said that increased competition due to many new trading platforms to rival exchanges has fragmented share price data, making it harder to ensure investors are getting the best deal.

The Committee of European Securities Regulators or CESR, made up of national watchdogs from each EU state, will study how MiFID affects share markets and trade reporting.

"Indeed, this work becomes all the more critical in times of crisis, where market transparency and effective transaction reporting are key to maintaining confidence in financial markets," Jean-Paul Servais, chairman of CESR's MiFID expert group, said in a statement.

The review will look at whether MiFID's trade reporting rules should be extended to corporate bonds, structured finance products and derivatives traded off an exchange.

Servais, who is also chairman of the Belgian banking and market supervisor CBFA, said the review also forms part of CESR's response to the worst financial crisis in 80 years which has sparked calls for increased transparency.