U.K. Clashes With EU Over Boost to Market Regulator’s Powers

The U.K. said that giving a European Union agency emergency powers to ban some securities trades may be illegal -- in the country’s latest clash over EU decision-making after failing to derail curbs on banker bonuses.

Britain said draft EU rules that were endorsed by governments today may cede too many powers to the European Securities and Markets Authority, according to a document setting out the U.K.’s stance, obtained by Bloomberg News.

“The U.K. expresses concern that it is legally uncertain whether the powers granted to ESMA” are “acceptable,” according to the note that Britain circulated to other EU nations. The plans may clash with EU rules limiting the decision-making powers of the bloc’s agencies, the U.K. said.

Britain has often found itself on the defensive in EU discussions on financial regulation. The nation, which lacks a veto on financial laws, was the sole dissenting voice in March opposing a deal to ban bonuses more than twice fixed pay.

The latest clash concerns plans to revamp the EU’s Markets in Financial Instruments Directive, or Mifid. While the overhaul foresees giving broader powers to ESMA, the Paris-based agency could only use them as a last resort if there was a threat to the EU’s financial stability, and if national regulators were unwilling or unable to act.

Derivatives Trades

Ambassadors for the EU’s 27 nations reached a deal on the Mifid law today, setting up negotiations with the European Parliament on the final version of the text. The deal came after the U.K. and Germany resolved a disagreement over measures to boost competition in the clearing of derivatives trades.

Under today’s deal, exchanges will be obliged to share their trade data with clearinghouses owned by other operators. The accord allows this access to be refused if there are signals that it could pose a threat to financial stability.

“Open access will ensure that consumers have greater choice over where to clear and trade financial products,” the U.K. government said in an e-mailed statement.

This will be become increasingly important over time, as more derivatives trading moves onto regulated markets as a result of agreements reached by the Group of 20 nations, the U.K. said in the statement.

Britain is already locked in a legal challenge against an EU law from 2012 that gives ESMA the ability to temporarily ban short selling across the 27-nation EU. Lawyers for Britain urged the bloc’s top court last week to quash the “wide” and “unpredictable” powers of an EU agency to ban short selling.

A spokesman for the U.K. government office in Brussels didn’t have an immediate comment on the extension of ESMA’s powers. A spokeswoman for the Irish government, which holds the rotating presidency of the EU, declined to comment on the U.K. declaration.

Lawmakers at the European Parliament must also agree on the draft Mifid law before it can take effect.

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