MEPs have voted in the European parliament’s Strasbourg plenary session to back proposals that will fight market abuse and restore confidence in the bloc’s financial markets.
The new rules voted through on Tuesday include stronger powers for regulators, stronger sanctions – including a permanent ban on perpetrators, a move towards a cross-border surveillance system and greater protection for whistleblowers.
Parliament’s rapporteur on insider dealing and market manipulation (market abuse), Arlene McCarthy, described 2012’s rate-rigging Libor scandal as “market manipulation of the worst kind”.
The Libor scandal was uncovered in July 2012, where it became apparent that banks and traders had rigged rates, affecting hundreds of trillions of euros of derivatives and loans, including mortgages, across the world.
McArthy said, “We are seeing more alleged and potential manipulation of benchmarks in energy markets such as oil and gas and foreign exchange markets.
“These new rules will close the Libor loophole and ensure all such benchmarks and indices are covered in the law.”
The S&D deputy said, “The litmus test of our new market abuse rules is whether in a fast moving, hi-tech global financial system these rules can capture, potential and emerging abuses and whether those who commit market abuse in the UK and Europe will face the full force of the law rather than being extradited to the US because they have tougher sanctions and longer jail sentences.
“This law closes the gap and sends a clear signal that the EU is not a soft option or safe haven for perpetrators of market abuse.”
Internal market commissioner Michel Barnier welcomed the agreement, which he said would “establish tougher rules to better prevent, detect and punish market abuse”.
“With this agreement, the European parliament has made a decisive contribution to the fight against insider dealing and market manipulation,” he explained.
“Rules will be extended to capture abuse on the electronic trading platforms that have proliferated in recent years; abusive strategies through high frequency trading will be clearly prohibited.”
He continued, “Those who manipulate benchmarks such as Libor will be guilty of market abuse and face tough fines.
“Market abuse occurring across both commodity and related derivative markets will be prohibited, and cooperation between financial and commodity regulators will be reinforced.”
“Furthermore, the deterrent effect of the legislation will be far greater than today, with the possibility of fines at least up to three times the profit made from market abuse, or at least 15 per cent of turnover for companies. member states could decide to go beyond this minimum.”
Written for theparliament.com