ECMI Policy Briefs

1 - 21 of 21
13 February 2015

The call for a Capital Markets Union has been a useful device to raise awareness about the need for more integration in Europe's capital markets. Despite years of harmonising regulation and a single currency, Europe’s capital markets remain fragmented. This Policy Brief calls for targeted measures to overcome fragmentation, through enhanced enforcement, strengthening of the European supervisory authorities, enhanced disclosure and comparability of financial information and the mobilisation savings in EU-wide investment funds. 

10 December 2013

At present, the market is severely mispricing Greece’s sovereign risk relative to the country’s fundamentals. As a result of the mispricing, financial intermediation in Greece has become dysfunctional and the privatisation of state-owned assets has stalled. This mispricing is partially due to an illiquid and fragmented government yield curve.

08 November 2012

After more than a decade of indecision, the EU is finally now set to implement a consistent regulatory architecture for clearing and settlement. Following the agreement on a European market infrastructure Regulation (EMIR), the European Commission has proposed harmonised rules for centralised settlement depositaries (CSDs), while the European Central Bank is moving forward with its plans for a central eurozone settlement engine.

27 February 2012

Updated May 2012 and reposted: In 2011, an EU legislative package on market abuse was proposed, which comprises two sets of documents: 1) a draft Regulation that will largely replace the existing Market Abuse Directive (MAD) and the level 2 measures; and a new Directive dealing with criminal sanctions. Market abuse rules are needed to ensure market integrity and investor confidence, and to allow companies to raise capital and contribute to economic growth, thereby increasing employment.

13 October 2010

Despite having singled out credit rating agencies (CRAs) early on in the financial crisis as needing more regulation, policy-makers in the EU seem not to be reassured by the measures that have been adopted in the meantime, and want to go further. This paper starts with an overview of the credit rating industry today. The second section analyses the use of credit ratings and shows how the authorities have created a captive or artificial market for CRAs. Section 3 reviews the new EU CRA regulation and its possible impact, and the final section compares proposals for regulatory reform.

15 April 2010

The European asset management industry is feeling squeezed from all sides, as a result of growing prudential, product and conduct regulation. A new Directive, UCITS IV, has only just been enacted, and already new challenges are emerging in the regulation of hedge and venture capital funds, the review of the regulatory regime for depositaries (or financial custodians) and amendments to the MiFID Directive. In addition, a new European supervisory framework is in the making, which implies much stricter controls on enforcement.

07 January 2010

Since 2003, the EU and the US have conducted a vibrant regulatory dialogue on financial regulation, but domestic priorities seem to have taken precedence in response to the financial crisis. This ECMI Policy Brief compares the institutional and regulatory changes occurring on both sides of the Atlantic. On the institutional side, it compares macro- and micro-prudential reforms. On the regulatory side, it compares four key areas: bank capital requirements, reform of the OTC derivative markets, and the regulation of credit ratings agencies and hedge funds.

04 June 2009

The financial crisis has sharpened the debate on Europe’s back office architecture. This paper reviews the ECB’s decision to proceed with its Target 2 Securities (T2S) project, which aims to establish a common IT platform for securities settlement, reducing differences between current infrastructures. The apparently solid configuration of the project shakes, however, when we closely examine the impact of this common infrastructure on the competitive landscape.

13 February 2009

Credit ratings are a quasi-public good, and investors and financial markets regulators need an independent assessment of the credit-worthiness of an issuing entity because of information asymmetries and principal agent problems. In light of the high volatility of market-based measures and the failure of internal risk management, private CRAs are best fit for purpose. However, natural barriers of entry in the rating business and conflicts of interest have led to an inflation of ratings and a deterioration in their quality. It would thus appear that CRAs need closer supervision.

03 April 2008

There remains considerable confusion as to how exactly the MiFID and UCITS directives will interact in the long run. This uncertainty reflects the growing pains of a regulatory transformation that represents no less than a tectonic shift from intense and prescriptive product regulation to a more flexible, principles-based regulation of management functions. Unlike UCITS, MiFID is a horizontal directive that cuts across the entire financial services industry (except for insurance).

20 December 2007

The intention of this article is to subject European financial centres to a SWOT analysis, assessing their Strengths, Weaknesses, Opportunities and Threats. We start with a closer definition of the term financial centre and a classification of the different kinds of financial centres found in Europe. A second section analyses the extent to which EU legislation and in particular the Financial Services Action Plan (FSAP) may lead to an intensification of financial centre competition. In a final section, we make some assessments for the future.

13 July 2007

This paper explores whether MiFID and Reg NMS could be accepted as equivalents by regulators on both sides of the Atlantic. Apart from many similarities, the most important one being that the main purpose of both measures is to enforce best execution in equity trading, there are many differences as well in the definition of best execution, the structures of the markets, and the role and powers of supervisory authorities.

11 April 2007

This paper explores the reasons why European sovereign bond markets have developed such a high degree of segmentation and considers how this structure could be altered to improve transparency without adversely affecting liquidity, efficiency or the benefits enjoyed by primary dealers and issuers. The author, Peter G. Dunne, a lecturer in Finance at the School of Management and Economics, Queen

03 April 2007

This policy brief examines the evolution of the hedge fund industry, the industry’s structure and the prospect of regulatory steps looming on the horizon. In the wake of the recent bust of Amaranth and of the increased ‘retailisation’ of the industry, hedge funds have increasingly come under the close scrutiny of regulators. In this ECMI Policy Brief, Charles Gottlieb explores the economic rationale that should be kept in mind for any appropriate policy making in this area.

30 March 2007

The opening-up of the market for equity market data raises the question of whether data will be sufficiently consolidated and of high enough quality post-MiFID, or whether it will become too fragmented, thereby hindering price transparency and the implementation of best execution policies. This policy brief outlines the market for financial market data, the provisions of MiFID and the implementing measures regarding financial data and data consolidation. It also looks at the approaches taken by CESR, the FSA and the US authorities.

12 December 2006

This ECMI Policy Brief attempts to contribute to the ongoing policy debate on MiFID art. 65.1, which tasks the Commission with conducting a study to report on whether the trade transparency requirements that currently apply to share trading ought to be extended to non-equity markets. It presents the pros and cons of introducing greater transparency into the marketplace, including a model on the possible impact of increasing transparency.

15 November 2006

The present Policy Brief paints a portrait of the likely EU securities market landscape post-MiFiD. Much of the available analysis on MiFID has focused on short-term adjustment and compliance costs, especially regarding IT investments. Yet MiFID represents a revolution in European securities markets that is likely to lead to deep and long-lasting structural changes. The analysis in this Policy Brief concentrates on ten predictions that the authors make about the likely impact of MiFID on market structures, and the likely strategic responses of financial services firms.

18 September 2006

As the European Commission is currently in the process of preparing its White Paper on the enhancement of the EU framework for investment funds (scheduled for November 2006), now is a good time to reflect on whether the UCITS framework needs a radical overhaul if the regulatory landscape is going to adapt itself to the reality of market evolutions.

23 May 2006

This Policy Brief provides a detailed critical analysis of the MiFID Directive’s draft implementing measures. It sets out to examine the evolution of EU regulation of investment firms from the original Investment Services Directive through the MiFID implementing measures, arguing that the EU Commission has moved from a principles- to a rules-based approach. The great level of detail in some of the implementing measures will impose significant costs to investment firms and could trigger unintended consequences.