LONDON, Dec 2 (Reuters) - Share trading inside banks must be regulated directly and all derivatives that can be cleared should be traded on an electronic platform, draft European Union plans showed on Thursday. The EU's executive European Commission is due next week to publish its plans for sweeping reforms of the bloc's markets in financial instruments directive (MiFID) which forms a cornerstone of the single capital market.
The consultation paper obtained by Reuters showed the EU's executive wants to crack down on trading inside banks which exchanges say reduces market transparency.
"The Commission services consider it appropriate to define and create a new sub-regime for crossing systems within the family of organised trading facilities," the document said. It also says that derivatives contracts traded on the vast off-exchange market should be transacted on an electronic platform of some sort if they can be centrally cleared.
The consultation also proposes a new regime within MiFID to regulate the use of computer of high-frequency trading, which refers to ultra fast execution of trades which has raised concerns among regulators.