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World Bank Working Paper
corporate bonds called TRACE (Trade Reporting and Compliance Engine) which has no equivalent in Europe. Municipal bonds benefit from post trade transparency through the Municipal Securities Rulemaking Board. Markets participants claim in Europe that despite the absence of trade transparency requirements, a large amount of information in bond market is already available through data vendors, private, and other sources.22 As for derivatives: Many are traded over the counter and are not subject to pre and post trade transparency requirements either in Europe or the United States. This is the case with CDSs, and other complex credit derivatives, although price information on CDSs might be available through data providers (for example in the United States through the Trade Information Warehouse of the Depositary Trust and Clearing Corporation23). However, exchanges do provide pre and post trade transparency for the derivatives traded on exchange (for example, futures). The issue of low transparency for off exchange derivatives is being debated in the two regions (see infra).
Notes
SEC: Guide to Broker Dealer Registration (April 2008). Directive 2003/6/EC of 28 January 2003 on insider dealing and market manipulation (market abuse). 3 Exchange Act, Section 3(a) (39). The form BD contains several reputational criteria and the Guide to Broker Dealer Registration indicates that broker dealers are subject to examination and inspection by the SEC and SROs. 4 Five tests for the assessment of a potential acquirer (Directive 44/2007/EC which amends the MiFID Directive among others): 1) the reputation of the proposed acquirer; 2) the reputation and experience on any person who will direct the business of the investment firm as a result of proposed acquisition; 3) the financial soundness of the proposed acquirer; 4) whether the investment firm will be able to continue to apply with the prudential requirements based on MiFID and other directives, in particular, whether a new corporate structure will allow for effective supervision; 5) whether there are reasonable grounds to suspect that in relation to proposed acquisition money laundering activities might be attempted, or there might be a high risk thereof. 5 Qualifying holding means any direct or indirect holding in an investment firm which represents 10 percent or more of the capital or of the voting rights, as set out in Articles 9 and 10 of Directive 2004/109/EC(2). 6 A proposed acquirer is considered to exercise a “significant influence” when its shareholding, although below the 10 percent threshold, allows it to exercise a significant influence over the management of the institution (for example, allows it to have a representative on the board of directors). Holdings are subject to the full notification requirements if the Member State concerned demonstrates, on a case by case basis, that the ownership structure of the target financial institution and the concrete involvement of the acquirer in the management create a significant influence even at this low level (Guidelines for the implementation of Directive 2007/44/EC). 7 SEC Rule 12b 2: The term “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or 1 2
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