Saturday, September 22, 2012

Move Towards EU Regulations Away from Directives Will Reduce Regulatory Arbitrage Says ESMA Chair

The move away from EU Directives to EU Regulations and ESMA standards and guidance will  contribtute to consistent and congruent  financial and derivatives regulation actoss the EU and increased investor protection and a stable financial architecture, in the view of Steven Maijoor, Chair of the European Securities and Markets Authority. This is so because EU Regulations, unlike Directives, aplly equally and the same to all EU member states and cannot be changed by national legislation. ESMA coordinates the implementation of consistent regulations throughout the member states as part of its remit.  ESMA guidelines not only help investor protection and stability, but also achieving consistent supervisory practices across the EU. 

ESMA also closely cooperate and communicate with national authorities in order to avoid and mitigate cross-border differences which would generate regulatory arbitrage and the fragmentation of financial markets.  Thus, said the Chair, ESMA helps to sustain the market depth of the European Single Financial Market as well as the related economies of scale and risk absorption capacities. 

The Chair noted ESMA’s soon to be completed standards on derivatives central counterparties to facilitate the stability and efficiency of derivative markets. They will provide the basis for effective regulation and supervision of these very important market infrastructures.  ESMA’s guidelines on high frequency trading support a smooth market process and minimize trading distortions.  Also, ETF guidelines support the stability of these investment funds by having requirements for the quality of collateral, securities lending and the use of repo transactions. The Chair's remarks came at a meeting of the EU financial markets association.