In its vote on the Investment Services Directive, the Economic and Monetary Affairs Committee supported by a large majority the rapporteur Ms Villiers, and reinstated amendments adopted by Parliament at first reading.
The committee amends important aspects of the Council position, which according to many commentators was too ambiguous and unworkable. The amendments deal with pre-trade transparency, the definition of internalisation and execution-only services.
Several Members pointed out that the result of the vote would be a basis for negotiations with Council before the vote in plenary. Other members pointed out that the clear vote of the Committee members was influenced by the inability and unwillingness of the Council to cooperate with the European Parliament.
However, Council will have to shift its position substantially to avoid conciliation. The report was adopted by 26 votes in favour, 8 against and 4 abstentions.
In particular, the committee has broadly reinstated Parliaments amendments to Article 27 regarding pre-trade transparency. These amendments, adopted by a large majority, lay down a requirement to quote in a 'standard market size'. They also allow for 'price improvement' for orders from professional clients under certain conditions. To reach a compromise with Council, the committee is more restrictive about allowing price improvement for orders from retail clients, which MEPs believe in general should be executed at the quoted price. They say a better price for retail clients should only apply in 'distinctive' circumstances.
The amendments also limit the discretion of the Commission regarding the definition of the 'standard size'. The Commission will have to take into account prevailing local market conditions, the effect on liquidity and price formation among other factors.
As for execution-only services, where no advice is given, the amendment simplifies the text. It is less restrictive than the common position, making it easier for intermediaries not to have to comply with the suitability test (Article 19).
Other amendments deal with commodities and derivatives, introducing criteria to define when they can be considered a financial instrument for which the single passport applies.
Parliament will vote at second reading, probably in March II in Strasbourg.
Final text
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