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EU Commission plans central database for financial information

The EU capital market is to grow closer together through a central database with information on the finances and sustainability of companies. The EU Commission proposed a legislative package on Thursday to standardize the European financial and capital markets. The EU-wide information platform “European Single Access Point” (ESAP) should make it easier for investors to invest in the EU. Information about listed companies as well as smaller companies should be listed centrally on the platform.

The Capital Markets Union is about removing bureaucratic hurdles between the states of the European Union in order to give companies more opportunities to raise money. Consumers should also have better access to investments in different countries.

According to the proposal, investors should in future be able to compare the prices of shares and other financial products on all European trading venues. A central register, called “Consolidated Tape”, is supposed to bundle this information in real time – at the moment it is not uniformly available. This should create more transparency and weld the European markets together.

Against the background of Brexit, there should be stricter rules for investment funds that are controlled from abroad. This is intended to counteract so-called letterbox companies that are registered in the EU – for example in countries with low taxes such as Luxembourg – but relocate essential functions and assets abroad.

The Commission also wants to ban a procedure that has so far enabled the business model of online trading platforms such as Robinhood. These process share purchases for investors cheaply or free of charge via third-party market participants. How the prices are created on these trading platforms is often unclear, and conflicts of interest can arise. In countries like Great Britain, such “payment for order flow” practices are therefore already banned.

Most of the suggestions were received positively. Jörg Asmussen from the German Insurance Association said that the central database ESAP improves access to financial and sustainability information. “Medium-sized companies that have so far been too seldom on the radar of institutional investors would also benefit from simple data access,” said Asmussen.

For some MEPs, the proposals did not go far enough. “Today’s proposals are at best a cautious beginning,” said Markus Ferber (CSU). Harmonizations in bankruptcy and tax law have not been addressed, said Sven Giegold (Greens). Both MEPs reacted critically to a complete ban on “Payment for order flow”. “The ban would be a gift for all conventional providers who want to get rid of the annoying fintech competition,” said Giegold.

The European Parliament and the EU states are now dealing with the legislative proposals. You can still make changes before these are adopted – which will likely take some time.


(mho)

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