European officials had agreed to create a "consolidated band" to gather real-time databases of stock purchase information, but the deal disappointed bank and fund managers to think it was aimed at undermining the dominance of exchanges. Supporters argue that the plan will increase transparency and encourage investors to attract to the region.
Policy makers argued that the creation of a band to unify the united European financial markets could be beneficial, especially over the establishment of a stock sales database. Banks and fund managers demanded a database containing all the offers and purchases in the market. The region's stock exchanges have tried to restrict this data. Brussels has long used similar records to mimic US capital markets.
Under the agreement reached on Thursday, real-time pre-trade bid prices will be displayed on the tape, but the exchange offering the prices will remain anonymous. As a result, investors will not know by whom the bids are made and will not be able to act accordingly. In short, although it is important for investors to know which offer is the best, it would make more sense to show where the offer is being made.
As a result of the agreement, it was announced that a political agreement had been reached on a review by the EU Council chairmanship of Sweden, which is expected to provide greater transparency. The exchanges generate revenue by licensing market data to customers. The proceeds will be distributed under the EU proposal and lobbied by the European Federation of Securities Exchange (FESE). Fese argues that European stock exchanges earn about 245m euros a year from these data, and that this gain compensates other services.
How this deal will affect financial markets will have to be discussed among experts with some differences of opinion. Some possible effects can be listed as follows:
Transparency: Once the database is created, investors can have easier access to real-time transaction information. This could bring more transparency to the markets.
Competition: Some banks and fund managers wanted a more comprehensive database. The limited scope of the database may have raised concerns that some may limit their competitive advantages.
Costs: Creating and operating a database can be costly, and these costs can eventually be reflected on investors.
Market Dynamics: The database can influence market dynamics. More transparency can help investors make more informed decisions.
Stock Exchanges: When this database is created, stock exchanges may decrease their revenue from data licenses.
As a result, this deal has the potential to affect financial markets. But the clear impact of the results will depend on how the database will be implemented, how it will affect market participants, and how financial regulations will evolve.