The European Commission (EC) has no intention of restricting securities finance markets, as some have suggested they are attempting to do with proposed reporting rules, according to the EC’s Martin Mitov. The securities financing markets are necessary to improve growth in Europe but they need to be transparent, he explained in a keynote address.

“Our current thinking is that we really need securities financing markets to improve the growth rates in Europe and at the same time we need them to be safe.”

He said the EC’s proposed regulation on transparency and reporting of securities financing transactions was aimed at improving transparency rather than attempting to stop financial institutions from doing these trades.

“There are no restrictions to those transactions and we do not believe that there exist any elements which will constrain any counterparty, be it a bank or investment fund or a non-financial to engage in securities financing transactions.” The proposal also requires transparency in rehypothecation of non-cash collateral.

Mitov said there was no intention to restrict rehypothecation “in any way” and that the proposals merely mirrored existing market practices. Market participants were concerned that regulators would not have the resources to analyse properly the vast amounts of data that this level of reporting would generate.

Mitov said: “We do not consider that collecting data for the sake of having the data is important. We consider that collecting the data is about providing the necessary instruments to supervisors and the regulators to take a timely action and if necessary to react to market developments.”

He said the specific use of each data element would be revealed in the level two technical standards that are being prepared by the European Securities and Markets Authority.