The European Parliament’s Economic and Monetary Affairs Committee (EMAC) has given majority backing to a string of amendments to the revamped Investment Services Directive (ISD).

The amendments, tabled by ISD rapporteur, UK MEP Theresa Villiers (EPP-ED, UK), reinstate a number of measures adopted by the Parliament in its first reading of the ISD last year.

A number of the proposed Parliamentary measures were subsequently vetoed by the EU Council of Ministers, leading to a spat between the two EU bodies.

Villiers claimed the amended Directive proposal from the Council was “dire”. and argued that the text had become “unclear and unworkable” and would add huge costs to investment firms as a result.

The Parliament’s revised text reinstates policies on pre-trade transparency and the definition of internalisation and execution-only services.

Speaking previously to IPE.com, Villiers said the measures were important to ensure that ordinary wholesale OTC trading would not be disrupted by the new ISD.

OTC trading, she said, provided services that were vital if institutional investors like pension funds and UCITS were to manage the savings of their customers in an efficient manner and maximise the returns for their clients.

Villiers further argued that the text proposed by the Council would damage institutional investors’ ability to manage their equity positions and maximise returns for investors: “That means a reduced savings income for consumers who invest in UCITS and pensions,” she said. “Institutional investors often seek an off-exchange solution because the central order book cannot always readily deliver the service they want – immediate execution of wholesale size orders at an agreed price.”

Following the vote, members of EMAC claimed the result of the vote could act as a basis for negotiations with the Council. However, it was recognised that the Council would have to shift its position substantially to avoid the process of conciliation normal in such disputes between Parliament and Council.

The Parliament will likely vote on the second reading of the ISD in March in Strasbourg.

The Investment Services Directive, part of the Financial Services Action Plan, updates EU legislation dating from 1993, which established a single passport for investment firms operating in Europe. The new legislation aims to create more competition between stock exchanges and investment firms that internalise orders, with common rules governing the negotiation and execution of transactions on financial instruments. At the same time, it harmonises requirements governing the activities of financial intermediaries to protect investors. Member States will have to comply with the directive two years after its entry into force.