There could be trouble ahead

[seancass]

I have posted this message on Direct Access and Stock Brokers too. It is of importance to all Direct Access traders in Europe.

This message was received from Theresa Villiers this afternoon: It does not make very good reading I'm afraid!




You may recall from my previous emails on execution only and the Investment Services directive that the excellent result in the vote in the European Parliament was only half the battle. To succeed in averting the threat to execution-only, my amendments needed to be accepted by finance ministers as well as by MEPs.

Many of you will be aware that Europe's finance ministers (sitting as the Council of Ministers or "Ecofin") voted on the Investment Services directive last week, including the controversial "suitability test" provisions in Article 18. I am very sorry to report that that the result was deeply unsatisfactory.

It is highly regrettable that Treasury Minister, Paul Boateng, who attended the finance ministers' meeting, could only secure this poor outcome - an outcome which is bad for investor choice and bad for financial markets right across Europe. The result in the Council of Ministers was not nearly as good as that in the European Parliament.

While the amendments to Article 18 adopted by the ministers make some attempt to answer your concerns on execution-only, very big problems remain. In particular, the exemption from the suitability test will not apply where the execution-only service is advertised. There are a number of other qualifications and restrictions which mean that the Council of Ministers's text would still threaten the continued viability of execution- only services.

Even worse, a highly unsatisfactory amendment was adopted by the ministers on the so-called "quote disclosure rule". This will end your ability to choose between different execution venues and force all investors to process their trades through the London Stock Exchange. The dire result on this issue will also make it more difficult to reach a balanced and fair outcome on Article 18 and execution-only.

It is now up to me and other MEPs to see what we can salvage from this mess. The Investment Services directive will come back to the European Parliament for a second reading, later this year or early in 2004. The Parliament will then have three months to come up with their response to the Council. I am already starting my campaign to build support within the Parliament, in order to ensure that investors in the UK and Europe are able to continue to benefit from cheap, "no frills" share dealing.

However, I must be completely frank with you that this major setback in the Council of Ministers means that it will now be difficult or impossible to obtain a satisfactory result on the ISD. I will contact you in the near future to inform you of my progress.

For your info, I attach a copy of a letter which was published in the Times shortly before Mr Boateng and the finance ministers took their decision, as well as a Times business editorial on this.

Yours sincerely
Theresa Villiers MEP
European Parliament Rapporteur for the Investment Services Directive


Office of Theresa Villiers MEP
Conservative Member of the European Parliament for London

Room 14 E116
European Parliament
47-53 rue Wiertz
B-1047 Brussels
Tel: 00322 284 5792, Fax: 00322 284 9792.

Email: [email protected]
Website: www.theresavilliers.com

 

[boy]

GREAT!!

Just as I was getting the hang of things they move the 'effing goalposts!

 

[Oldun]

I haven't yet had the chance properly to consider all this.

Is not the answer simply to open US accounts with US brokers and the EU and UK with their directives, stamp duty etc can go and eff***** themselves?

 

[Rognvald]

My first reaction is that this could have quite serious effects on our freedom to trade as we wish in whatever we wish, whenever and wherever we wish. These are freedoms that the internet has given us.

However I don't have sufficient details to base any rational decisions on - does this relate soley to trading in LSE quoted stocks and stocks on foreign exchanges or does it include futures and options, and other derivatives - cfds etc. How could/would it be policed?

I would not wish to be an unecessary harbinger of gloom but feel that we should get together some sort of grouping of interested parties from this site and really "gen up" on what is actually intended and what the ramifications may be.

Are they seriously saying that someone trading HKI futures or a greasy wool contract will have to do it through LSE after taking suitability advice - what do LSE think of this. Just what is involved here?

If others here have more knowledge then please post it. If not then I think that it is time we acquired it

Thanks seancass for the info

 

[seancass]

Good evening Oldun,

"Eff****** themselves?"

Eh, have you been taking lessons from your friend Car Key Boi!!??

Best wishes,
Sean

 

[oatman]

I was under the impression that it referred to stock trading. If that is the case you will see a rapid development of stock futures which are neglected at the moment.

 

[Trader333]

This whole issue is very serious and especially for those, like myself, who wish to trade stocks on an intraday basis.

Basically what it says is that you cannot make a trade without consulting your broker about the consequences for doing so. This means added costs for every trade you make and delay in the time taken to place a trade. It applies to all brokers who have clients living in the EU so trading US stocks will not exempt you.

In my view it is another example of the Nanny state taking away our freedoms. The next thing that we will be told is that before crossing the road we will have to consult Road Safety Experts so that we understand that if we do so there may be a chance that we could get run over.

In my view it really is pathetic and will only feather the nests of those brokers who told us all to buy tech stocks in early 2000.

I contacted IB about this and they responded by saying that even if implemented it is a long time away before it is. For me I will probably register an address in the US if I need to or even consider emigrating.

Of course there will be no requirement by SB companies to do the same which makes the whole directive of no use at all.

It is yet another example of theoretical bureaucratic idiots imposing something they have no understanding of at all and is very depressing for our ability to trade.


Paul

 

[seancass]

Rognvald,

I have sent an e mail to IB asking for their interpretation of this intention among our European Governors and to state their current position in respect of those of us who seek to trade US stocks using a US broker.

I will post a reply when I receive one. I think your idea of a small group of member fact-finders is excellent, although I reckon this issue is of such importance that members will wade into the debate and bring their thoughts and information with them. I do hope so.

Best wishes,
Sean

 

[seancass]

Trader333

Thanks for that.

I reckon that IB and other US brokers will find an acceptable solution to this issue. For example, by placing on their trading platform a standard warning re: losses/high risk etc. etc. and making it a requirement that you'tick' the message before hitting the sell/buy buttons. In effect then, they would be brokers "offering advice" such as: "BEFORE YOU PLACE THIS TRADE WE MUST ADVISE YOU, AS YOUR APPOINTED BROKER, THAT IF YOU MESS UP YOU'LL GO BUST AND IF YOU CLEAN UP YOU'LL BE BLESSED!" (Not quite like that of course, but you get my drift?) Advice has been given, taken and off we go!

To suppose that we should call IB by telephone and ask their advice as to whether we should short BGEN is absurd.

Best wishes,
Sean

 

[boy]

Oatman, you have an interesting point there regarding stock futures.

Trader paul, the longer it takes the better, but if you need an mailing address let me know cos my pal has a house in Florida.

 

[Rognvald]

Maybe its time to register an offshore company and trade from it

 

[FTSE Beater]

I was under the impression that it referred to stock trading. If that is the case you will see a rapid development of stock futures which are neglected at the moment.

Hi Oatman

I'm sorry but I have to disagree with you on this one

Stock futures at the moment suffer from much wider spreads and very poor liquidity. I doubt even if the whole of the European based US trading community traded Stock futures that the liquidity would be there. The US wouldn't jump in on the band wagon as there's no need for them.

<hr>
Hi Paul

Emigrating in a few years time sounds like a good option, only problem is too many good golf courses in the US

 

[Trader333]

Hi All,

I am constantly heartened by the mutual support and ideas found on this site. I always feel hopeful and better when I see responses that may solve what at first appears a difficult problem so thank you.


Paul

 

[oatman]

Stock Futures - sorry, wrong FB.
The medium is there. Nobody has heard of it outside of professional circles. Most people have never even heard of futures. I've seen "dead" illiquid markets before.
You weren't around when the oil market started.
Physical oil was a nice cosy set up, (still is). When prices started to fall the big boys, who'd laughed at the idea of a futures market were forced to hedge, to save themselves. Sell futures or lose their a*ses and their jobs.
No choice, whether they liked it or not they had to hedge.
You'd be amazed how we can adapt when we have to.

And, don't forget.........

 

[seancass]

Trader333

I couldn't agree more. That's the strength of this site.

I know a very wise man who is a very young 86 years of age. His attitude in life is this:
"Everyone experiences problems in life; problems are everywhere, even on those days when you think things are going very well and you are unaware of God creeping up behind you with a raised sock filled with wet sand...! No, the problems will always be there. However, the man/woman who ponders on the solutions to those problems and actually discovers solutions, ah, now they are worth their weight in gold!

Sean

 

[al-motor]

Good one Sean- keep up your efforts...........

 

[bisto]

the power

i remember being in a brick & morter job , then along came the FSA

 

[Oldun]

Sean,

Really!! What are you suggesting?

From BOY (post 2 on this thread), alternatively effluent, effluvient, effervescence, effort, effortless, effective, efficatious, effacing etc. etc. ... ... In the further alternative, if considering the EU or the UK ruling bodies, eff***** or perhaps that is simply too good for them.

See you elsewhere

 

[seancass]

Good one Sean- keep up your efforts...........

Thank you very much, Al-motor.

"Keep up your Efforts!" What a wonderful slogan for Viagara. Let's call Pfizer in the morning. We'll share the proceeds and that will help us to pay for the financial advice necessary to place trades if our Euro governors get their way!

Oldun - quick, add it to the list...EFF orts! Another one. Like effing goldfish, they're everywhere.

Al-motor, as the lucky recipient of my 100th post on Trade2win, you have won a place on my forthcoming tutorial at Morag's Cafe in Canning Town! My previous tutorial was at Belmarsh, but talk of volatility breakouts excited the residents.

Best wishes,
Sean

 

[alanb41252]

Does anyone have any idea of the time frame for final implementation of this Euro absurdity ?

"Excuse me Mr Broker but do you think I should go long or short on XYZ stock ?"

Absolute nonsense which I am sure the industry will circumvent one way or another.

Will SB companies be subject to this proposed "law" too ?