For City institutions, the question of expanding EU business after Brexit is being usurped by pending comprehensive new trading rules for the continent.
The arrival in January of MiFID II, sweeping European legislation that aims to inject greater transparency and reinforce investor protections, is looming uppermost for many trading entities in London.
While the UK will enforce MiFID II in full, the key issue is whether after Brexit, the UK and EU will operate financial services under the same rules. Known as regulatory equivalence, this would defuse tension in the City and insulate them from having to make radical changes. The risk, however is one of a hard Brexit and no agreement over regulatory standards that makes the UK’s acceptance of MiFID II a moot point for the City.
“When thinking about MiFID II, you always have to think about Brexit as well since both topics are interconnected,” says Niels Tomm, director of group regulatory strategy at Deutsche Börse.
Most City institutions are continuing to work on the worst-case scenario that the UK leaves the EU in March 2019 without a deal, or transitional arrangements that some UK ministers have talked about.
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