Foundations of EU Securities Market Law

This is the introductory chapter of the book ‘EU Securities Regulation: Aims, Tools and Idiosyncrasies’, forthcoming with Oxford University Press.

This chapter sets the foundations of the book as a functional, economics- and finance-grounded guide to EU securities market law. It designs a general method to interpret the relevant rules in light of their effect on economic choices, enabling the reader to check the alignment with the legislator’s stated goals (aims), to identify the regulatory technique(s) to pursue each goal (tools), and to incorporate the specificities of EU law in designing securities regulation (idiosyncrasies). We therefore structure the analysis of the following content chapters as follows: I) market failures; II) stated goals; III) tools; IV) idiosyncrasies.

In this foundations chapter, we identify four essential features of well-functioning securities markets: a) liquidity; b) price accuracy; c) effective project screening; and d) effective management monitoring. Whenever any one of these features is absent or insufficient in unaided markets, there is a prima facie case for securities markets law to intervene and restore those features, unless the cost of doing so exceeds the benefit. On this basis, we have identified nine areas of EU securities markets law supporting one or more of the four features and will write a chapter on each of them: 1) market abuse; 2) mandatory disclosure; 3) information intermediaries; 4) UCITS and AIFMD; 5) investment services; 6) trading venues; 7) short selling; 8) fintech; 9) sustainable finance. In addition, two cross-cutting chapters will focus on cross-border and international aspects and on supervision and enforcement.

The book’s ambition is to provide its readers with the tools to understand the economic and financial rationales of EU legal rules and the additional policy considerations that may lie behind them, so that they can independently make sense of, and interpret, EU securities markets laws and regulations that the book does not cover, whether because they are not among the topics it focuses on or, importantly, because they are enacted after the book is published.