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EU to hold marathon talks on new securities law

A laser beam touches the Gherkin from the Shard during the laser and searchlight show which marks the completion of the exterior of the Shar
A laser beam touches the Gherkin from the Shard during the laser and searchlight show which marks the completion of the exterior of the Shar

By Huw Jones

LONDON (Reuters) - Negotiations over sweeping changes to European Union securities market rules enter what may be the final stretch on Wednesday with several key elements already agreed.

The bloc's Markets in Financial Instruments Directive or MiFID is being updated to reflect rapid advances in trading technology and apply lessons from the 2007-09 financial crisis to stock, bond and derivatives markets.

The European Parliament and EU states have joint say on the final shape of the law and representatives from both sides have set aside over six hours to hammer out an outline deal.

In earlier meetings agreement was reached on curbing anonymous or "dark pool" trading and supervising high-frequency or ultra-fast trading.

There is also agreement on a new breed of trading platform, known as an organized trading facility or OTF for trading off-exchange swaps contracts, the EU's counterpart to the new U.S. organized trading facilities which are already up and running.

Wednesday's meeting will seek a deal on remaining contentious issues, such as who should be responsible for imposing curbs known as position limits on commodity derivative markets to stop any one trader holding too much sway.

Policymakers have insisted on such curbs to stop what they see as speculators pushing up food and energy prices.

Many EU states want national authorities to have the responsibility but parliament would like the bloc's securities watchdog, the European securities and Markets Authority (ESMA) to have the upper hand.

EU presidency holder Lithuania, which will lead negotiations on behalf of member states, is proposing that ESMA agrees the rules for setting position limits and member states apply them, an EU document seen by Reuters said.

"In order to take the experience of the trading venues into account, it is suggested that position limits would initially be set by reference to position limits currently in place on the trading venues," the document said.

Some exchanges have bowed to the inevitable and already imposed limits and the document said there should be a public consultation before limits are set by authorities.

The presidency will also back parliament's view that derivatives positions should be totted up on a net, rather than the larger gross basis.

Wednesday's talks will try to resolve one of the most contentious elements of all: open access or allowing investors who trade on a particular platform to clear the transaction elsewhere rather than in the platform's own clearing house.

Parliament wants open access put on hold, arguing it risks splitting up market liquidity and the EU presidency has proposed a transitional period.

The aim is to reach a broad enough agreement on the outstanding issues in MiFID, in particular on open access, for the bloc's member state ambassadors to endorse next week.

Markus Ferber, the German center right lawmaker who is leading negotiations for parliament, told Reuters this month he is planning for MiFID to be completed before Christmas.

(Editing by David Evans)

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