By Anna McLauchlin - 4th March 2004
EU capitals are inching towards the European Parliament's views on how investment firms trade on the stock market.
The Irish government, currently at the helm of the EU's six month rotating presidency, met with member states in an informal meeting on Wednesday to try to bridge the gap which has divided governments and MEPs on the so-called Investment Services Directive.
Ireland presented a compromise text that moves towards the parliament on how large a trade investment houses have to make public to the market but does not budge on the matter of price improvement.
Price improvement means that traders who advertise that they have a certain number of shares to buy or sell outside the exchange are not obliged to stick to that price; if they want to they can improve on their publicly quoted price for individual customers.
MEPs voted last week to allow stockbrokers to improve on its prices for institutional and individual investors but under restrictions for the latter.
But EU finance ministers are sticking to their guns and do not want any price improvement for individual investors and only limited improvement for institutional investors.
The deep divide between the council and parliament has been due to the fact that France, Spain and Italy do not want to lose their investment system where all share trading is put through the stock exchange, and so are battling against any form of 'behind the scenes' trading.
But in the UK, and to a lesser extent Ireland, Scandinavia and Germany, off-exchange dealing is a major part of the trading industry and firms will bear enormous risk if they are forced to be too open about their trading positions.
MEPs last week voted in an informal committee to maintain their original position supporting more significant off exchange trading on the directive and demanded that EU capitals move towards their position.
Sources close to the negotiations say most countries have moved towards the new council position, but France, Spain and Italy are still holding out.
They can form a blocking minority on the text if it goes to a majority vote as it did in October, when council approved a more stringent text despite objections from the UK, Ireland, Finland, Luxembourg and Sweden.
The Irish presidency is under pressure to reach a compromise with member states that MEPs might be prepared to come towards if they are to get this law through in this parliament.
It is a key directive in the European Commission's Financial Services Action Plan which aims to create a single European market in financial services by 2005.
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