The amended text of the European market infrastructure regulation (EMIR), as voted for by the
Economic and Monetary Affairs Committee (ECON) of the European Parliament yesterday, contained a clause that may allow trading venues to licence derivatives from existing markets more easily. The amendment may help Turquoise Derivatives, the recently formed derivatives business of The London Stock Exchange (LSE), to widen its range of stock index instruments beyond UK FTSE 100-based futures.
Tabled by ECON chair Sharon Bowles MEP, the new clause says that where intellectual property rights or commercial ownership relates “to products or services which have become or impact upon industry standards there shall be a requirement for licences to be available on proportionate fair, reasonable and non-discriminatory terms”.
The licencing of non-UK derivatives contracts has proven challenging for Turquoise, which plans to launch derivatives trading in the first week of June. Concerns have been raised over the lack of competition in European listed derivatives following the announcement of a proposed merger between market operators NYSE Euronext and Deutsche Börse, which would result in a dominant position. However, European competition authorities are expected to require new governance arrangements for certain businesses with the merged entity as the price of allowing the deal.
Responding to the vote, Adrian Farnham, CEO of Turquoise, said in a statement, “We welcome attempts to further competition within the European derivatives space, and work closely with policymakers in both the UK and Europe to ensure a more competitive environment, which will be to the benefit of market participants.”
Another source was cautious about the degree to which the legislation would be able to facilitate licencing, noting that the language of the amendment still allowed room for interpretation, and that a venue that wished to restrict licencing of its own derivatives products could still impose cost barriers.
Chi-X Europe, the multilateral trading facility recently acquired by fellow exchange group BATS Global Markets, has taken an alternative route to offering stock index derivatives by partnering with Russell Investments, the US-based investment services and equity indices provider, to launch a new series of European indices. The instruments will use Chi-X Europe's prices for stocks as the underlying source, to provide pan-European pricing.
The new text will now be voted on in a full session of the Parliament but must also be reconciled with a draft agreed by governments at the Council of the European Union.