Markets continue to struggle with the prospects of a new political future and structure.

Steven Maijoor, chair of European Securities and Markets Authority (ESMA), told the audience at the IOMA, World Federation of Exchanges Clearing and Derivatives Conference in Frankfurt on Thursday that there are challenges for the EU’s long pursuit of a single rulebook. Brexit will have a “negative impact” on efforts for market harmonization, as well as the so-called capital market union in the EU.

David Wright, chairman of Eurofi Paris and partner at Flint Global, said the United Kingdom will have to be a “rule taker and if you don’t, you fall back.”

Those sentiments leave many wondering, just what is the future of London as THE financial hub, not to mention where does that leave the EU? The UK and EU are getting divorced yet somehow have to work out how to remain business partners.

Perhaps the UK could adopt a slightly more flexible regulatory regime to protect its crown jewel, the City. If Donald Trump can “do a number” on Dodd-Frank, maybe the UK can do a number on the freight train of European regs coming down the track, so goes the reasoning. Of course, that would lead to the EU creating any number of barriers between its markets and London as well.

Meanwhile, large players in London are hedging their positioning, literally, examining where else they might move or expand operations in Europe. Talk of moving significant amounts of business to the US is not considered practical here.

It’s quite a turn of events really, to go from talking about the combination of the London Stock Exchange Group and Deutsche Boerse to a more fragmented and disjointed environment. And as Hans-Ole Jochumsen, vice chairman of Nasdaq, pointed out, there aren’t a lot of votes to be gained by championing the cause of capital markets to the masses.

So, for an industry that craves regulatory certainty, it’s getting a heavy dose of regulatory and political uncertainty for the next two years as Brexit trundles ahead. Industry leaders like to say that the financial industry is good at adapting to change. But the problem going forward is figuring out just what it is they need to adapt to.


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