Euronext welcomes and appreciates all the efforts already put into the creation of a coherent framework of texts but wishes to stress that even more should be done on this front in order to arrive at true global coherence. Euronext believes that, at the moment, some of the texts proposed would fall short of delivering the consistent framework which is expected in order to create an efficient integrated capital market by 2005.
In relation to the reform of the ISD, Euronext is deeply concerned by some of the proposals put on the table.
Firstly, the proposed text opens the door for a widespread internalisation of order flow by investment firms which in practice will allow these firms to carry out the same functions as those performed by regulated markets operators but under a totally different framework of obligations. This will lead to a distortion of competition between the two types of entities, which is not acceptable. Moreover and even more worrying, these proposals will undermine the functioning of order-driven markets (whose strength derives from the concentration of orders) since internalisation of client orders by investment firms will restrict the interaction of orders and price discovery to the detriment of end investors. Euronext believes the Commission should reconsider the aspect of internalisation of orders by investment firms, or at the very minimum, should submit internalisation to conditions equivalent to those imposed on regulated markets, with a view of preserving a transparent price discovery mechanism, and a true possibility for the final investor to check the best execution of his orders.
Secondly, the commercial dimension of real time data dissemination by Exchanges should be recognised. This service is an intrinsic part of the value added of an Exchange, and the quality and the price of this service is part of the competition between Exchanges in the market place.
In order to bring our contribution to the consultation process on the review of the Investment Services Directive, Euronext has prepared the following documents:
Comments on the Commission proposals to revise the ISD (Appendix I);
