EU urged to copy London.

It’s not hard to see why. The directive is supposed to maximise harmonisation standards but experts in London insist it is several rungs lower than the regulatory regime in the City.

They worry that a lower level of regulation means greater risk, undermined integrity and a exodus of investors from London.

The belief is that Europe’s agenda is a redistributive one – moving money to other markets – rather than one that levels the playing field.

The EU has moved to offer reassurance. It has pointed out that the prospectus directive will only concern itself with flotation prospectuses – market regulation, the bureaucrats insist will remain a separate issue for national watchdogs such as the FSA.

But there is a problem lurking in the wings. If Europe is keen to pursue harmonisation across member states, then in principle there’s no reason to stop with uniform prospectus rules. The unavoidable conclusion is that it will also have to harmonise regulation. That’s a chilling thought for City players who see London regulation as the toughest, and the best, in Europe.

Harmonisation could, if carried out on European terms, reduce the level of stringency in London where toughness is seen as one of the biggest selling points. Will investors and companies spend and list in London?

Or will they find another place to trade?

These are the questions that will make the FSA’s current review of listing rules so important. If there is support from commerce it will provide backing and confidence for the FSA and the Treasury to argue the case for London style listings regulation to be given to the whole of Europe. If not, well the LSE and other markets may be looking at a very much tougher future.

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