To say that it has been a turbulent time in global

equities markets is something of an understatement, but the

European picture provides some interesting pointers to the bigger

geopolitical debate that's going on. A couple of events in

particular caught my attention. First, there was title="Short-selling confusion"

href="http://www.ft.com/cms/s/0/dcf270ac-c4bc-11e0-9c4d-00144feabdc0.html#axzz1V55vqymo"

target="_blank">the ban on short-selling in banking

stocks imposed by France, Italy, Spain and Belgium and

the

href="http://www.ft.com/cms/s/0/763a185e-c4e1-11e0-9c4d-00144feabdc0.html#axzz1VNnOWX6o"

target="_blank">backlash that followed. Then came

href="http://www.ft.com/cms/s/0/02f7c644-c98b-11e0-9eb8-00144feabdc0.html#axzz1VSw5cxZe"

target="_blank">France's abortive attempt to extend

the short-selling ban to major European indices. The

initial ban was easy to sidestep as these stocks are now traded

very much on a pan-European basis and so any country-specific ban

just pushes trading onto platforms operated in other countries,

as the chart below illustrates. Traders can still take a negative

position on markets through futures, options and CFDs

too.

href="http://fragmentation.fidessa.com/wp-content/uploads/Credit-Agricole.png"> class="aligncenter size-full wp-image-2840" title="Credit

Agricole"

src="http://fragmentation.fidessa.com/wp-content/uploads/Credit-Agricole.png"

alt="" width="432" height="439" />On top of this was

the chatter coming out of Europe about imposing some sort of

href="http://www.reuters.com/article/2011/08/17/us-tobintax-reax-idUSTRE77G1MK20110817"

target="_blank">Tobin tax on financial transactions.

Again, all this served to do was highlight the possibilities for

regulatory arbitrage. It would be just too tempting for one

European state to create a tax free trading zone and so hoover up

all the available liquidity.

Both of these

events highlight the broader European problem: its member states

must either get closer together or move further apart. The

current debt crises surrounding Greece and other nations seem

unlikely to be permanently resolved until this happens. And,

similarly, we need

href="http://www.esma.europa.eu/"

target="_blank">ESMA to either really show its teeth

and impose one set of rules for European trading or leave it to

each country regulator to make its own rules. In both cases the

'getting closer' option imposes some tough

political choices and a requirement to put short-term national

self-interest to one side. The alternative 'go it

alone' strategy looks scarier still, but maybe either

is better than the current status quo.