EU struggles with payment action trading rules for order flow

LONDON, Nov 17 (Reuters) – European Union states moved closer on Thursday to dropping a proposal to ban brokers charging fees for directing exchange trades to trading venues. specific.

Payment for order flow (PFOF) came under intense scrutiny last year when an army of retail investors flocked to “meme stocks” on Wall Street, using brokers who touted the merits of charging no fees, making money by sending the orders to an agreed venue for execution.

The US wonders if curbs are needed for PFOF when the UK has already banned it.

The EU ban was proposed in a bill by the EU’s executive European Commission updating the bloc’s MiFID II securities law, with EU states and the European Parliament having the last word.

Building on German and French suggestions to continue allowing PFOF but under strict conditions, the Czech EU presidency presented an informal compromise on Thursday at a meeting of EU member state officials.

A broker receiving payments from a trading platform must match or better the share price offered in the broader market, according to the compromise seen by Reuters.

To make this possible, a separate proposal in the MiFID bill to create a “consolidated tape” to record share prices across the bloc’s multiple trading venues, would likely need to include bid prices and not just prices. completed transactions. fight against.

Separately, the European Parliament’s Economic Affairs Committee also debated PFOF on Thursday, with lead lawmaker Danuta Huebner saying the committee is split between those who want to allow PFOF under strict conditions and those who support a ban.

“We have here one of the most difficult discussions in search of a compromise, she said.

The Federation of European Securities Exchanges (EFSE) said talks over the PFOF and the consolidated band risked “cementing fragmentation and opacity” in the markets.

However, Huebner said competitiveness in EU markets is key given competition from Britain and the United States.

“We have to take competitiveness very seriously from the point of view that we remain attractive and that capital will not flow into London because of Brexit,” said Hubner.

On Thursday, EU financial services chief Mairead McGuinness outlined new plans due next month to boost EU capital markets, partly in response to Brexit.

Reporting by Huw Jones; Editing by Elaine Hardcastle

Our standards: The Thomson Reuters Trust Principles.

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