Welsh Conservatives in the European Parliament
Dr Kay Swinburne MEP

TradeTech Derivatives, 14.04.11

Over the past few years, the financial community in the UK has become increasingly aware that a lot of the new legislation affecting their businesses is coming from a new source - the EU. Yet knowledge in the marketplace over exactly what the EU legislative process is and how it works is patchy at best.
As a result, there is an impression in the UK that regulation is "done to us", that it comes down, is imposed - or in many instances claimed to be over imposed, by enthusiastic, subsequent British gold plating, with no say on the practitioners part.
I have to tell you, that in my experience in the past 18 months as an MEP, that is not usually the case and certainly does not have to be the case.
There are lots of ways to influence the EU legislative process, and the more financial services providers and users commit to engaging in the process then the better the legislation will be.
Apologies to those of you who work directly in the system, but given the complexity of the process and the many actors involved in developing and implementing EU legislation, I want to take a few minutes explaining the typical journey from political decision to legislation, to implementing the final directive or Regulation.
Let's start with the difference between a directive and regulation - both are forms of EU legislation, though a regulation is expected to be incorporated into national law as it is, without the need for further law making in the 27 member states. A directive is just that - it directs the national parliaments to establish national laws which will enact the legislation proposed by a certain time, and then expects them to supervise its local implementation. A directive is therefore open to national interpretation, whereas a regulation has less national flexibility and usually a shorter time to come into force.
There are three important EU institutions involved in all stages of the legislative process - namely the council of Ministers, representing the governments of the 27 Member States, the European Commission, who are effectively an enhanced civil service, and finally the European Parliament which has 736 members of which I am one.
Typically politicians will identify any issue which needs new legislation or an amendment to existing legislation and ask the commission to investigate and to bring forwards proposals for consideration. This list of priorities is often heard from heads of state delivered at G20 meetings or from the Commissioner directly, who details the short, medium and long term agenda. Post financial crisis, much of the current legislative programme has originated at G20 sessions and from specific cases of market, company, or system failure. We currently have over 50 legislative dossiers working their way through the Council and the Parliament's Economic and Monetary Affairs committee.
The Commission will often produce a "green' paper early in process to gauge reactions both in the European Parliament and in the Member States, and if this makes it to the legislative stage then they will produce a white paper.
In between these phases they will engage in a broad public consultation process which is a key point for evidence based intervention by those likely to be affected by proposals. Once a report is produced by the Commission following this consultation, the European Parliament appoints a rapporteur to put forward parliament's view and the current Presidency of the Council do likewise. When both have established a position - they come together in Trialogue where detailed negotiations eventually yield a legislative proposal for both the Council and the parliament to vote on.
So how can the financial industry make a difference in this complex, but pre-determined process?
To take the most topical derivatives reform proposals as a case in point - EMIR, the European Markets Infrastructure Regulation - getting your acronyms right is always key with European issues.
In the Parliament, as an MEP, I have worked with industry groups on certain key issues, literally for the past eighteen months - that's six months before the Commission's public consultation came out, and a full year before their legislative proposals came out, making certain these views were taken into account.
One of my biggest worries with all of the legislation we are working on which is primarily to improve the stability of the financial system was what will be the cost of this derivatives legislation for the wider economy? To answer this, I mobilised the CBI to bring together a group of businesses very early on to try to understand what the cost implications of central clearing of derivatives would be for them.
They then worked collectively and with the help of their banks to come up with facts and data to support their position namely, that these proposals would put an unnecessary burden on businesses, whilst offering little or no added benefit.
Businesses organised themselves across Europe via the European Association of Corporate Treasurers and so proved this was not a "UK problem", and successfully won over key staff in the Commission, who have now allowed a corporate exemption, with the necessary safe guards, into the draft legislation.
As the next part of the legislative process involves MEPs amending the Commission's text, and the European Council, made up of Member State's Governments, working in parallel to do the same thing before coming together to reach a compromise on final legislation, the corporates used case studies from the constituencies of each MEP, taking arguments about complex financial products home for the MEPs, making it real to them.
If a lobbyist comes to my door and says that a piece of legislation is going to lead to a loss of a number of jobs in my constituency, in this economic climate, then I am going to hear them out!
The process on EMIR isn't over, we still have a lot of political deliberations to get through- including the trialogue I previously referred to, that usually takes many, many hours of deliberations, but one of the most central tenets to the regulation that is now very difficult to remove is this corporate carve out. Businesses and their trade organisations were organised, they engaged early, with facts and reasoned arguments, and they have stayed engaged at the right levels throughout the whole process - these are the lessons to be learned more widely.
Particularly as we are embarking on the second phase of derivatives reform legislation within MiFID II - the Markets in Financial Instruments Directive.
Last year, I wrote what is called, an own initiative report for the Parliament, which basically sets out the political direction that the Parliament would like to see the Commission's future legislative work take. The report, Trading in Financial Instruments: dark pools, algos and High Frequency Trading, covered some of the many areas that MiFID II will cover, although mainly focussed on the equity markets.
Getting to lead the Parliament through this precursory process has been very useful in seeing where different political lines are, and where the gaps in my own, and other people's information exist. I have been able to ask industry and regulators for facts and figures, and in some cases, have faced a brick wall. Organisations claim they often don't collect certain key data, or alternatively they often don't compile it in a useable form- or even that no one has ever asked them for it before!
I now have more sympathy for the civil servants in the European Commission, those tasked with writing the legislation that is about to deluge financial services. The Commission staff told me in 2009 that the finance industry never gave them anything constructive and evidence-based that they could work with, they said banks, in particular, were prone to visiting to merely complain that everything the Commission did was wrong - I was sceptical, I thought maybe the Commission didn't particularly want to listen, but when I went out with the express purpose of engaging with industry (and with a financial services background, so a slight head start on the civil servants) I found it incredibly difficult to get useable information from either buy or sell-side organisations.
Since that shaky start, I am now happy to say that many groups within the financial industry have started to mobilise, data is coming in, but it always takes time - and the G20 deadline of 2012 for a lot of the legislation we are working on and is at the front of all of my colleagues minds. You have to be aware that if you simply say that things won't work and don't provide alterative solutions, and more importantly examples of what will work, then this will not all just go away. Society has committed to regulating the financial services sector more rigorously than before - as Commissioner Barnier for Internal Markets likes to say "No product, no market and no market participant shall go unregulated" - he is not planning on backing away from that because of dissent from the City of London.
Many of you watched last year as the Dodd-Frank bill passed in the US. For six months different politicians of different political persuasions went on CNN and other channels and grand standed over wide reaching political principles - the Volker rule, the Lynch amendment, living wills, amongst many.
After all of the speeches were made, the two houses wrote their texts which culminated in a big political agreement - which in essence is what the Dodd Frank Bill is. The details are all worked out later following detailed studies, impact assessments, and most importantly, done by the rule makers. The CFTC and SEC have a huge amount of scope to enact the political mandate given by the politicians - the thousands of experts in the two organisations may only have limited time and resources to do it, but they are experts in their field.
I can tell by the meetings and hearings and the sheer number of consultation responses generated by each potential rule laid down by the CFTC that industry is fully engaged in what they are doing on derivatives legislation. They follow what is going on; they know who has voted what way on each rule and are quick to speak up about the changes they think need to be made. The US political system is not simple, it's not straightforward - yet you all manage to interact with it.
From my earlier description it is clear that the EU processes are similar yet different to the US. Instead of politicians giving the mandate and the experts taking over implementation of the detail, in Europe the commission, the civil servants, write the initial piece of work - then the politicians have their hands upon it for the rest of the process - we do the detail. Myself and my colleagues literally amend all the way down to specifying the exact amount of euros a clearing house should hold in own capital - I'm currently having an interesting argument over whether it should be 5, 10 or 25 million euros - I'm not sure whether that is quite what my Welsh electorate thought I would be doing when they elected me.
In the end I anticipate that the EU and the US will come out in similar places, we are all signed up to the G20 commitments and take them very seriously. The US politicians may have had the easy process of just one piece of legislation whereas the EU seems to have to do it in 48 separate pieces or more to reach the same result - but once all of the rule making and the trialogues are done, we are all working towards the same goal.
My fundamental message today, is that EU legislation does not just appear as a finished article solely to add costs and red tape for your lawyers and compliance officers to get around. If you learn how the EU works, and engage early, with facts and reasoned arguments you can have a positive effect.
It is in all of our interests to have good, smart legislation which promotes stable and successful financial markets. You know how your businesses work and are best placed to inform legislators about it - I urge you not to miss the opportunity.
Join Our Mailing List Get in Touch
Welsh Conservatives

The European Commission has today designated European Protected Geographical Indication (PGI) status to the well-known Pembrokeshire Early Potato from West Wales.
The Pembrokeshire Early Potato was one of only three quality farm products whose applications for PGI status were approved today.
The EU PGI schemes protect product names against misuse and under these schemes more than 1200 products are already protected.
Commenting on this announcement from the European Commission today Dr Kay Swinburne MEP – who is from West Wales - said:
"I am delighted to see that this application to have "Pembrokeshire Earlies" added to the register of PGI products has been approved by the European Commission today."

"Achieving this prestigious status is a clear acknowledgment of the high-quality and distinctive produce we continue to deliver in Wales. Pembrokeshire Early Potatoes thoroughly deserve their place alongside the well-known food and drink products from right across the EU which already feature on the PGI register."


Kay was delighted to host an event to celebrate Higher Education, Science and Innovation in Wales last night in the European Parliament.  The event builds on the British Council’s “Strategic Analysis of the Welsh Higher Education Sector, Distinctive Assets”.  A number of experts spoke to share their views of Welsh HE at the event and how it can develop in the future.

In advance of the 'Fox-Hafner Report' vote on the single seat for the European Parliament, Kay and the other UK Conservative MEPs feel it is right to draw attention to the fact that the seven-year cost of the dual-seat arrangement comes to £928,000,000. Since her election to the European Parliament in 2009, Kay has strongly supported bringing the monthly Parliamentary meetings in Strasbourg to an end and therefore saving taxpayers a considerable sum of money.


Kay was delighted to meet Malala Yousafzai, who was awarded the EU's Sakharov Human Rights Prize at the European Parliament today.

Following Malala’s speech to the European Parliament, Kay said, “What an inspirational speech Malala gave to the Members of the European Parliament today. As a mother of young children myself, I hope that they can also aspire to achieve like her. Malala is an exceptional young lady who has overcome adversity by tremendous force of character and a passionate belief in the right of everybody to enjoy and benefit from education.”   


Kay was very pleased to meet with members of the Advanced Manufacturing Research Group at the European Parliament in Brussels, one of four groups set up in key Welsh research strengths to engage with EU research funds. The delegation visiting Brussels included representatives from Cardiff University, Bangor University, Swansea University and Trinity St.Davids University.

In advance of tomorrow's European Council meeting of leaders, Dr Swinburne has echoed the recommendations made in a recent report published by a number of business leaders, which highlights the importance of removing barriers to business competitiveness in Europe and getting rid of burdensome legislation by cutting EU red tape.

Last year Dr Swinburne encouraged businesses in Wales to highlight to the European Commission which over-burdensome regulations they would like to see slashed, by writing to small businesses all over Wales and asking them to tell her their red-tape problems.

Electronic cigarettes no longer face being taken off the shelves by the EU after Conservative MEPs were successful today in amending EU legislation on tobacco labelling.

Conservative MEP's led the amendment to defeat proposals that would have classified e-cigarettes as medicinal products, meaning they would have to undergo an overly burdensome and costly authorisation procedure, which would go beyond the procedures for traditional tobacco products... (Read more under 'Articles')



Welsh Conservative MEP Kay Swinburne has been sitting down with leaders in Europe's biotech field to choose the top five candidates to compete in this year's EuropaBio Most Innovative EU Biotech SME Award.

As a member of this year's judging committee, Kay is once again supporting the EuropaBio award, which has attracted applications from all three sectors of biotechnology - healthcare, industrial and agricultural, from across the EU... (Read more under 'Articles')


WELSH Conservative MEP Dr Kay Swinburne today hailed a vote in the European Parliament as a "wake-up call" in the battle to save Europe's endangered languages.

MEPs meeting in Strasbourg backed a report which calls on governments across the EU to develop action plans to encourage continued linguistic diversity.

The report, written by Corsican MEP François Alfonsi, also says governments should be "more attentive" to threats which may lead to languages becoming extinct.

Dr Swinburne, who was a shadow rapporteur for the report, has argued that Welsh can be seen as a positive example of language revitalisation which communities across the EU should follow... (Read more under 'Articles')

Contact Us
Dr Kay Swinburne MEP
Rhumney House
Copse Walk
Cardiff Gate Business Park
CF23 8RB

Tel: 029 2054 0895

National Political Party: Conservative Party
European Group: European Conservatives and Reformists Group (ECR)

European Conservative and Conformist Group
© Copyright Kay Swinburne 2013 | All rights reserved. | Photographs of the Parliament supplied by Adam Issacs.

Website design in Cardiff by Designer Websites Ltd