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Investment Exchanges and Clearing Houses Bill

My hon. Friend the Economic Secretary has indeed, as he explained to the House, had conversations with the leading figures responsible for the two US exchanges. They have confirmed to him that they see no obstacle to their interest in the London stock exchange in the content of the Bill. I want to make it clear to the hon. Gentleman that the issue is not one of protecting business, but one of safeguarding the regulatory approach that we have in London, which is defined and controlled by the FSA. The hon. Member for South-West Hertfordshire (Mr. Gauke) alighted on a couple of legal points, particularly in relation to clause 1 and the factors that the FSA may take into account under proposed new subsection (4). If he will forgive me, those points may be better dealt with in the next stage of the proceedings, particularly in relation to amendment No. 8 in the name of the hon. Member for Fareham. We all have an interest in the Bill, but the hon. Member for Cities of London and Westminster (Mr. Field) is really the only Member of the House with an authentic constituency interest in its content. He clearly has an interest in the future competitiveness of the City of London, as he explained. He rightly argued the importance of a light-touch, principles-based approach to the regulatory regime. The Bill reflects that. There were two questions—first, from the hon. Member for Fareham and, secondly, from my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) in an intervention—on the timings in the process that the FSA will be responsible for. The hon. Member for Fareham asked whether the 30-day period would be sufficient for the FSA to consider the impact of any proposed rule changes and then make a decision about whether to call in such proposals. In drafting the Bill, we consulted the FSA. It makes its supervisory decisions independently, within the framework of the Financial Services and Markets Act 2000. In drafting the Bill as we have, we believe that it strikes the right balance between giving the FSA sufficient time to consider the potential impact of proposed rule changes and ensuring that there is not unnecessary delay or uncertainty in the system. My hon. Friend the Member for Wolverhampton, South-West is quite right to make an observation about the lack of specified time limits for the representations in the Bill. He probably would have found that in the explanatory notes, as well. [Interruption.] My hon. Friend the Member for Edmonton says that that is if my hon. Friend the Member for Wolverhampton, South-West got to the explanatory notes. In my experience, my hon. Friend goes first to the explanatory notes. I have never been involved in a debate on a piece of legislation in which he has not scrutinised the explanatory notes in extreme detail. He is correct to say that the FSA will be able to set the period for representations. The reason why is that it is important that there is sufficient time for careful scrutiny in what we regard as the likely rare event that the FSA decides to call in a regulatory provision. However, as was set out in the letter from the chief executive of the FSA, the FSA will use that power in a way that is consistent with its principles-based approach to regulation. I should also explain to the House that that is consistent with other consultation powers under the Financial Services and Markets Act. I turn to the concerns that the hon. Member for Twickenham worried away at in his contribution. He questioned, first and foremost, whether the Bill is necessary. Although all the recognised investment exchanges and clearing houses have reservations about the detail of the Bill and will welcome the scrutiny that the House is providing, the Joint Exchanges Committee thinks that the Bill is necessary. It states:"““We all appreciate and support any initiatives that protect UK regulatory standards from extraterritorial interference.””" The London stock exchange thinks that it is necessary. It states:"““we are very supportive of the plans to give the FSA additional powers to veto any attempts to introduce excessive or disproportionate regulations that would impair the City’s ability to compete for global equity markets business.””" The CBI thinks so. It says that it"““Seems clear that all this is highly advantageous””." The Association of British Insurers also thinks so. It tells us:"““We believe it is very positive that the government has demonstrated clear political will to combat creeping extra-territorialism””." It is reasonable to pose the question—as the hon. Gentleman did—of why any commercially run exchange would want to damage its own business by excessive regulation. However, the owners of an exchange or clearing house can come under a variety of pressures to change their regulatory provision and rules and those pressures may not always have a commercial motivation or a commercial source. Competition may not always be effective in challenging or controlling those pressures. The hon. Gentleman’s second question was: why is existing legislation not sufficient? I assume that he had in mind EC regulations and the Protection of Trading Interests Act 1980. The existing legislation could be used only if an overseas authority sought to impose its national requirements directly on a UK exchange or clearing house in respect of its UK activities. In contrast, if an overseas owner were subjected to pressure under its home state law or regulations to secure that a UK investment exchange or clearing house was operated in practice in accordance with that state’s law, the existing European regulation and the Protection of Trading Interests Act could not prevent lawful instructions being given by the foreign owners. The Bill, however, will allow for all regulatory provision to be assessed so as to prevent regulation that is excessive in the UK context from being made, whatever its source. We need to ensure that the regulatory provision of key providers of investment exchanges and clearing houses remains appropriate in all circumstances and that it reflects the proportionate, risk-based approach set out in UK and EU law. That is why we are introducing the Bill. I hope that my hon. Friend the Economic Secretary and I can reassure the House that the Bill will achieve those important objectives and will do so without imposing an unnecessary burden on exchanges and clearing houses. I look forward to further debate and to support—I hope—from both sides of the House on Second Reading and in subsequent stages. Question put and agreed to. Bill read a Second time, and committed to a Committee of the whole House, pursuant to Order [this day]. Bill immediately considered in Committee.