Comparing European and U.S. Securities Regulations

Tanja Boskovic

Description

This paper, aimed at professionals, scholars, and government officials in the field of securities regulations, compares the European (specifically the Market in Financial Instruments Directive-MiFID) and U.S. securities regulations. The analysis focuses on the regulatory and supervisory framework, trading venues, and the provision of investment services. We show that although there may be regional differences in the structure and rules of current securities regulation, the objectives and some outcomes of regulation are comparable. Similarly, as the current global financial and economic crisis exposed gaps in securities regulations worldwide, regulators in both regions face similar challenges. This study will be particularly useful for World Bank member countries that are looking at either the European or U.S. regulations when conducting market reforms.

Sujets

• Broker
• Capital requirement
• Financial crisis
• Financial institution
• International Bank
• Market liquidity
• Security (finance)
• Trading
• Transparency
• Law and development

Informations

• Publié par: world-bank-publications
• Publié le: 12 janvier 2010
• Nombre de lectures: 29
• EAN13: 9780821382547
• Langue: English

Extrait

WORLD BANK WORKING PAPER NO. 184
Comparing European and
U.S. Securities Regulations
MiFID versus Corresponding U.S. Regulations
Tanja Boskovic
Caroline Cerruti
Michel Noel
THE WORLD BANKWORLD BANK WORKING PAPER NO. 184
Comparinguropeannd
U.S.ecuritiesegulations
MiFIDersusorresponding.S.egulations
Tanjaoskovic
Carolineerruti
Micheloel
























WP_184_web_12-09-09.pdf 1WP_184_web_12-09-09.pdf 1 12/9/2009 11:55:13 AM12/9/2009 11:55:13 AMCopyright010
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WP_184_web_12-09-09.pdf 2WP_184_web_12-09-09.pdf 2 112/9/2009 11:55:32 AM2/9/2009 11:55:32 AM



Contents
Acknowledgments...................................................................................................................iv
Acronymsndbbr eviations.................................................................................................v
Executiveummary ............................................................................................................. .....vi
Introduction................................................................................................................................1
1.egulatoryFramework ndversight .............................................................................. 2
EUecuritiesra mework..................................................................................................2
U.S.ecurities Framework3
2.copeftheecur itiesegulations ................................................................................... 7
TheUecuritiesegulationsocusnnvestment irmsndradingenues.....7
The.S.ecuritiesegulationsocusn Brokerealersnd xchanges.................9
3.bjectivesoftheecuritiesegulationsnuropendhenitedStates.............. 14
ObjectivesfheUecurities egulations ..................................................................14
Objectivesfhe.S. Securitiesegulations ................................................................15
4.mplementationfhe ifferent Objectives17
Asegardsompetition/Fairnd rderlyarket s....................................................17
Asegardsnvestors’r otection....................................................................................22
Asegardsriceiscovery: rendostTraderanspa rencyequirements......24
5. Post-Financial Crisis Lessons............................................................................................... 29
Betterupervisionfargendnterconn ectedinancial Institutions....................29
IncreaseMarketransparen cy........................................................................................30
Enhanceapitalndiquidityeq uirements..............................................................30
6. Conclusion and Areas for Future Research........................................................................ 33
Appendixes.................................................................................................................... ...........36
Technicalppendix:re andostraderansparency Requirements,urope
andhenited States................................................................................................ 37
Technicalppendix:etailed omparativenalysis .............................................. 39
References ...........172


iii
WP_184_web_12-09-09.pdf 3WP_184_web_12-09-09.pdf 3 12/9/2009 11:55:33 AM12/9/2009 11:55:33 AM
Acknowledgments
hisReporthasbeenpreparedbyTanjaBoskovic,CarolineCerruti,andMichelTNoelallorldank).
TheauthorsthankSophieSirtaine(SectorManager,ECSPF,WorldBank)forher
guidance and support. They thank the peer reviewers: Burçak Inel Martenczuk
(Deputy Secretary General, Federation of European Securities Exchanges), Oliver
Fratzscher(SeniorFinancial Economist,GCMSM,WorldBank),andTadashiEndo
(Senior Financial Sector Specialist, GCMSM, World Bank) for agreeing to provide
commentsonthereport.TheauthorsaregratefultoJohnPollner(LeadFinancial
Officer,ECSPF,WorldBank),LucaFossati(PolicyAdviser,SecuritiesMarketsPolicy
and Company Law, Federation of European Securities Exchanges), Rosa Armesto
(Economics and Statistics Adviser, Federation of European Securities Exchanges),
Thomas Gira (Executive Viceresident, FINRA), and Jon Kroeper (Senior Vice
President,FINRA)fortheirvaluableinputs.All errorsandomissionsareauthors’
alone.
Theauthors’viewsexpressedinthispublicationdonotnecessarilyreflectthe
viewsfheorldank rnyftsffiliates.


iv
WP_184_web_12-09-09.pdf 4WP_184_web_12-09-09.pdf 4 12/9/2009 11:55:33 AM12/9/2009 11:55:33 AMAcronymsndAbbreviations
AML Antioneyaundering
ATS Alternativeradingystem
BIS Bankornternationalettlements
CAR Capitaldequacyequirement
CDS Creditefaultwaps
CESR Committeefuro peanecuritiesegulators
CFTC Commodityuturesradingommission
DJIA Dowonesndustrialverage
ECN ElectronicommunicationNetwork
EU Europeannion
EC Europeanommission
FESE Federationfuropean ecuritiesxchanges
FHC Financialoldingompanies
FINRA Financialndustryegulatoryuthority
FRB Federaleserveoard
FSAP Financialervicesctionlan
IOSCO InternationalOrganizationofecuritiesommission
ISD Investmentervicesirective
MiFID Marketninancialnstrumentsirective004/39/EC
MTF Multilateralradingacility
NASD Nationalssociationfecuritiesealers
NASDAQociation ofecuritiesealersAutomateduotations
NMS NationalMarketystem
NYSE Neworktockxchange
OTC Overheounter
RegTS Regulationlternativeradingystems
RegMS Regulationationalarketystem
RM Regulatedarket
SEC Securitiesndxchangeommission
SI Systematicnternalizer
SRO Selfegulatoryrganization
TRACE Tradeeportingndompliancengine
UCITS Undertakingorollective Investmentsnransferableecurities


v
WP_184_web_12-09-09.pdf 5WP_184_web_12-09-09.pdf 5 12/9/2009 11:55:33 AM12/9/2009 11:55:33 AMExecutiveummary
hepurposeofthispaperistocomparetheEUandU.S.securitiesregulations.InTNovember2007,theMarketinFinancialInstrumentsDirective2004/39/EC(MiFID)
came into force in the EU, and brou ght about deep changes in the market
infrastructure.ThesameyearRegulationNMSintheUnitedStateswasfully enacted
andreformedequitiesmarkets.ThisstudycomparesMiFIDwiththecorresponding
U.S.regulations,andprimarilyfocusesontheregulatoryandsupervisoryframework,
tradingvenues,andtheprovisionofinvestment services.Implementationoftherules,
enforcement,andrighttoredressarebeyondthescopeofthispaper.Likewise,the
paperdoesotntendoudgeheffectiv enessfhewoegulatorysystems.
Theinternationalfinancialcrisisevidencedsomegapsinsecuritiesregulations.
Main issues have focused on the imperfect oversight of large interconnected
institutions,thelowtransparencyofOTCmarkets,especiallyderivatives,andthe
insufficientliquidityandcapitalacrossfinancialinstitutions. Regulatorsonbothsides
havennouncedlans oddresshem:

Abettersupervisionoflargeandinterconnectedinstitutions :UndertheU.S.
regulatory reform plans, the Federal Reserve would have the power to
conductconsolidatedsupervisionandregulationofalllargeinterconnected
financial firms. These firms will be sub ject to the noninancial activities
restrictionsoftheBankHoldingCompanyAct,regardlessofwhetherthey
owninsureddepositaryinstitutions.IntheEU,aSystemicRiskC