Members of the European Parliament, politicians from EU member states and Brussels bureaucrats are locked in debate over the draft revised Investment Services Directive (ISD), one of the key parts of commissioner Frits Bolkestein's plans for an integrated European capital market.
What worries banks most is a clause that will force them to quote publicly bid and offer prices at which they are obliged to trade, rather than keep some deals in-house. Banks claim that stock exchanges are trying to steal business, and stock exchanges say banks are trying to profit by misleading investors.
Supporters of the plan, including continental European stock exchanges such as Milan and Frankfurt, say the pre-trade transparency provisions contained in Article 25 of the ISD will protect investors and ensure they get a better deal from their brokers.
Fabrizio Plateroti, head of regulation and post-trading at Borsa Italiana says: "In a very fragmented market, pre-trade transparency allows a better price-discovery process and acts as a market integrity tool. And through that, we can provide a better best-execution process." If all possible venues through which an investor might execute a trade are forced to quote bid-offer prices, prices will find their most competitive level.