I find it rather appropriate this season that the three European bodies – the Commission, the Council and the Parliament (the latter with rapporteur Arlene McCarthy’s version) – are each bearing us a gift. Instead of the traditional gold, frankincense and myrrh, each is bringing its own take on the Market Abuse Directive. These slightly different texts will be discussed during the trilogue which should start in Brussels any day now.

One important element in all three documents is the repeated mention of the widening of scope to include benchmarks and interest rates in light of the recent Libor rate rigging cases against several big banks. They all make it clear that there will be deterrent sanctions and that market manipulation or insider dealing will be treated as a criminal offence. Unlike civil offences, the perpetrator can face a prison sentence in addition to being subject to a financial penalty. The Parliament’s McCarthy text calls for greater spending and investment by Member States to ensure that effective investigative tools are available.

The Parliament prescribes imprisonment for those convicted of market abuse; a term of at least five years for insider dealing and at least two years for improper disclosure of inside information and the dissemination of information through the media or other means. The proportionality of any financial sanction will depend on the profits made and the extent of the damage done.

The Council document provides the most descriptive definition of how the directive should apply to all financial instruments, regardless of the trading platform, and includes OTC trading in its scope.

So the final directive will be an amalgamation of the three different offerings. We can only hope that the mixing of these various ingredients doesn’t resemble an ancient alchemist’s disastrous experiment and that the gift turns out to be real and not fool’s gold.