Members of the European Parliament, Commissioner, Chairmen of Regulatory Agencies, Colleagues from FESE Members and other Exchanges, Distinguished Guests.
It is a great pleasure for me to welcome you all to the 9th European Financial Markets Convention. I am happy and proud to see such a large number of delegates and friends here today alongside such a superb list of speakers.
The theme of this year’s Convention is “Towards true integration by 2009”. We chose 2009 because that year marks both the term of the current Barroso Commission and the current 6th term of the European Parliament. Whether it will also include the 8th and 9th forthcoming half-year Presidency of the European Council with the Czech Republic and Sweden in the chair or whether we will by then have a European Constitution with longer troika Presidency terms, remains to be seen. We have returned to Brussels with our Convention with the intention of communicating to the European institutions and the public alike the European Exchange industry’s expectations and proposals for the remainder of this decade.
As I am sure most of you are fully aware, Members of the Federation of European Securities Exchanges have consistently supported efforts to create and improve a single integrated capital market in the European Union. Our efforts have focused on legislative and policy measures at the EU with the overall aim of creating a level playing field from which true competition can flourish and have its beneficial effects.
The Financial Services Action Plan of 1999 is almost complete. Legislation on financial markets, on (or rather against) market abuse, on prospectuses and transparency, on corporate governance, accounting and auditing has been passed or is at an advanced stage in the legislative process.
In contrast, on level II, crucial elements of the MiFID are still being worked out. A fine balance needs to be struck in order to enhance competition and market quality at the same time. In parallel, the work on the Transparency Directive with its laudable aim of efficient and effective information dissemination and storage across the EU, requires fundamental discussions on issues such as encouraged or mandated centralisation, public or private operation models, and the recognition of existing successful approaches.
What deserves increasing attention today and in the years to come is the aspect of implementation and enforcement. I happily cite and fully endorse the relevant passage in the Commission’s recent Green Paper on the Financial Services Policy for 2005-2010:
“The overall objective of the Commission’s financial services policy over the next 5 years includes
• to implement, enforce and continuously evaluate the existing legislative framework,
• to deploy rigorously the better regulation agenda for any future initiatives,
• to enhance supervisory convergence and
• to strengthen European influence in global financial markets.”
We need to remember that only when suppliers of services and their clients – be they at the retail or wholesale level – can safely disregard national and jurisdictional borders, can the benefits of an integrated market become an effective reality.
And, although I am speaking here at an event organised by FESE, the industry association of Exchanges and related service organisations, I want to emphasise that I am NOT requesting these benefits on behalf of the Exchanges and their shareholders. The European economy as a whole, its enterprises, its employees and pensioners – in short the citizens of Europe need and deserve an integrated financial market.
Commissioner McCreevy constantly emphasises the importance of implementation supervision. He and senior staff of DG MARKT have called on industry to assist the Commission in this task and to alert the Commission of implementation failures – be they through misunderstandings, as a result of leniency or worse, with the purpose of outright protectionism. In this context, FESE has come up with a proposal for a mediation service for financial services’ professionals across the EU. Where those disputes result from varying interpretations and approaches to enforcement of existing European legislation, such a mediation service would seek to handle cross-border disputes between on the one hand financial services companies and professionals and on the other national regulators. Our discussions with authorities and market participants on this proposal continue.
As I have said, in order that the internal market in financial services becomes a reality, a level playing field must be created. For the Federation and its Member Exchanges this means a level playing field in all areas of their activities:
• in the admission of securities,
• in trading,
• in clearing and settlement,
• in collecting, processing, and selling of market and company data
• or in whichever other aspect of securities markets in Europe.
Here I have to warn against the possibility of a dangerous misunderstanding: Creating a level playing field does NOT mean imposing a uniform business model across the continent. In the game of football, it is true, all teams have to compete with 11 players and using your hands to play the ball is not regarded as acceptable. But there is no rule that imposes on all teams that they should play “catenaccio” nor is there one that prescribes playing with a left wing, a right wing, both, or neither. You may trust an Italian in these matters.
Like a football pitch, Europe is a complicated place. Competition and the numerous alliances and other forms of cross-border cooperation between Exchanges amply demonstrate that there are many valid business models trying to compete in the overall market. It should not matter to regulators and legislators whether integration is horizontal or vertical or diagonal (like the Tower of Pisa) or whether Exchanges specialise to a high degree. What matters is that priorities are set by the Exchanges themselves in the context of the cold winds of competition and the disciplines of the market.
Nobody yet knows the outcome how this will all turn out. I am convinced that in the final analysis, it will be market forces that will determine which models at which time and in which areas will be successful and will create prosperity. Keenly aware of these imponderables, FESE and its Members watch intently, and with a high degree of interest the discussions within CESR and between CESR and its environment on regulatory and supervisory structures. CESR’s First Progress Report on Supervisory Convergence in the Field of Securities Markets for the Financial Services Committee (FSC) is fascinating to read.
FESE is happy to provide continuing input into the discussion and has responded to CESR’s earlier Himalaya Report. We look forward to hearing the views of the Economic and Monetary Affairs Committee of the European Parliament which has rapidly become a constructive force in our debates.
It is my belief, both as the CEO of a European Exchange and as the President of FESE, that the competitiveness and thus the attractiveness of the European capital market in the global economy must come higher on the agenda and become one of the prime criteria for assessing rule setting.
Only two days ago, I have had the occasion to re-emphasise this in a personal meeting with Commissioner McCreevy. He has assured me that competitiveness of the European economy in the global system is at the heart of his and his fellow Commissioners’ strategies.
As a part of this global dimension, FESE and its Members support the efforts of the Commission and of CESR to develop a systematic cooperation with American and other international authorities in order to avoid conflicting regulation and achieve regulatory equivalence.
The Transatlantic dialogue between the EU and the US in various forms has been making some progress. However, the Securities and Exchange Commission’s attitude on trading screens remains immovable and – you have heard me say this before – protectionist. Similarly, whereas American ownership of European Exchanges is certainly not seen as a problem, the example being the International Petroleum Exchange, European ownership of an US Exchange is considered a highly political issue in the US, even if the SEC Chair was recently heard indicating otherwise.
Let me however use this occasion to signal and applaud once again the very much appreciated openness of the CFTC – resulting no doubt from the concept of wide, open, level fields, which concept is more familiar to an institution that originated from the trade in agricultural products..
FESE and its Members follow the US market on a daily basis and we are very much interested in all the developments on the other side of the Atlantic Ocean. No doubt the recent reports the New York Stock Exchange and Archipelago as well about NASDAQ and Instinet will be the subject of some interesting discussions in the course of this Convention.
At a time when actions undertaken under the Lisbon agenda should start showing benefits for the European economy, we need to pay careful attention to the development of small and medium size enterprises. It is no secret that SMEs are one of the key engines of economic growth, bringing both prosperity and employment. Market financing is critical in their development and growth especially when they are heavily knowledge-based. Data shows that more and more SMEs resort to the markets for funding. The accession of ten new Members States with their often very fragmented business structures and their enormous growth potential, has added a new dimension to this essential role of financial services. Let me assure you that European Exchanges take very seriously their part in helping SMEs to achieve their business goals. This is an area of actively ongoing discussions with EVCA.
Distinguished guests,
Recent legal, regulatory and political developments within the EU have given FESE’s work a different perspective. Educational activities as well as continuous dialogue with the legislators and the regulators have assumed an extraordinary degree of importance.
I trust that our debates and discussions at this 9th European Financial Markets Convention will reflect this importance.