Global Policy Forum

EU restricts food speculation and limits high frequency trading (Mifid)

800px-Sommergerste_hreEuropean Parliament and Council achieved a significant breakthrough on the issue of high-speed trading. Yesterday, the EU reached an agreement over plans to reform the markets in the Financial Instruments Directive (Mifid), a law that sets the for securities markets in Europe. The application of Mifid will curb speculation, through the use of derivatives, in food, energy and other commodity markets.

January 16, 2014

EU restricts food speculation and limits high frequency trading (Mifid)

The deal is a result of an intense period which finally brought a step forward for curbing damaging practices in investment markets. The new legislation gives greater authority to the European Securities and Market Authority  to confine trading in food and commodity markets. Thus sensitive markets shall be prevented from speculation and large scale trading that can cause a manipulation of prices and result in severe crises on the food stuff market.

Moreover the European Parliament adopted new rules on public procurement and concession contracts that promote public fair trade procurement. For example local authorities are now provided with the opportunities to enact sstainable, social and ethical responsibility. The cheapest offer is no longer the only criterion that determines the European public procurement law.

Frequent calls for toughen the regulatory rules for high-frequency trading in stocks were made after the so-called flash crash in May 2010, during which the Dow Jones Industrial Average briefly lost almost 1,000 points.

The practice relies on high performance technology and complex computer programs to execute orders in milliseconds and takes advantage of discrepancies in security prices across different trading venues.

For more information check the website of Sven Giegold, Member of the European Parliament, here.


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