The paper sets out standards for the regulation of investment firms operating ATSs under the Investment Services Directive. CESR has been forced into a second round of consultation following a negative market response to its first paper, published in June 2001, which led to extensive changes being made.

Many market participants felt the initial proposed framework would stifle creativity and reduce choice for investors. In particular, criticism centred on:
* the interlinkages between the CESR work and the revision of the Investment Services Directive (ISD);
* the definition of an ATS;
* the need for more clarity on implementation of the standards;
* the potential overlap of certain standards with existing conduct of business rules; and
* the need for more cost benefit analysis.

Howard Davies, chairman of the UK Financial Services Authority, who led the group preparing the proposals, comments: “A clear majority of consultees agreed that a new regulatory approach to ATSs was required but many raised concerns about some of the detailed proposals. In particular, it was argued that the new standards were justified for multilateral ATS, but not necessarily for bilateral systems."

He says the second consultation paper has taken these concerns into account and significant changes have been made to the definition of ATSs and to the proposed standards.

CESR is concentrating on standards in the following areas:
Authorisation/registration: the investment firm running an ATS should provide to the competent authorities information about the price formation process, rules of the system, system participants and the types of instruments traded.
Transparency: ATSs should comply with minimum transparency requirements.
Reporting Rules: additional reporting requirements should be imposed on ATSs to the extent needed to enable competent authorities to monitor market share of ATSs and changes to the information provided during authorisation/registration.
Prevention of Market Abuse: requirements placed on ATSs should make it possible to detect, deter and punish market abuse.

CESR invites responses to this second round of consultation by 15 March, 2002. Interested parties may review the documents on the CESR Web site, where they may also submit comments via e-mail.

The Committee aims to publish final standards by June of this year.