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EU deal on market regulation

January 15, 2014

Following two years of talks, the European Union has agreed on a deal in principle on new rules for financial instruments markets. It said the deal would go a long way towards closing loopholes in speculative trading.

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Bull and bear in front of the Frankfurt Stock Exchange
Image: picture-alliance/dpa Themendienst

The agreement on tighter regulation of financial markets came after protracted negotiations between the European Parliament and representatives for the EU's 28 member states.

The deal was struck with the aim of curbing speculative trading in commodities and regulating high-frequency trading so as to better protect investors and make markets a lot safe.

The accord will, among other things, force market players to buy and sell financial instruments on regulated markets comparable to stock exchanges to ensure all trading activities are fully tracked.

Heeding the lessons of the past

The deal also sets rules on what is known as high-frequency trading based on automatic algorithmic systems. This will ensure investment firms must stop trading, if price volatility becomes too high.

Speculators blamed for high cocoa prices

In order to help limit speculation in food and energy, authorities for the first time will be able to limit the size of a net position a person can hold in commodity derivatives.

"The decision marks a good start in tackling gambling on food prices which are a matter of life and death for millions," Oxfam said in a statement.

Rampant speculation on markets had been blamed as a central cause of the global financial crisis starting in 2008 which also has a grave impact later on the eurozone debt dilemma.

hg/hc (AFP, AP, dpa)