LONDON (Reuters) - The European Union has made a late hour move to close a loophole that could have allowed banks to skirt tougher transparency rules for stock and bond trading from January.
The bloc’s executive European Commission published a draft amendment late on Tuesday to its “MiFID II” law that comes into force in just six months’ time.
The law toughens up transparency requirements by pushing more trading out of the “dark” and onto public platforms.
The Commission said an amendment was needed “in light of alleged nascent industry initiatives” that build on “ambiguity” in the law.
It follows concerns at the European Securities and Markets Authority (ESMA), which said in April that banks executing a client’s share order in-house were teaming up with each other and “high frequency traders” to act as a virtual trading platform, a service that needs a licence.
The Commission said there should be a clear separation between a bank dealing on its own account, and the multilateral trading seen on a platform.
Under the amendment, a bank would not be dealing on its own account if it was carrying out a “de facto riskless” transaction, meaning none of its own capital was on the line.
The industry has four weeks to respond to the Commission’s proposals.
Reporting by Huw Jones, editing by David Evans