Europe’s Market Users Warn Politicians to Stop Meddling With Rules

Terry Flanagan

Market practitioners in Europe are concerned that attempts to politicize the rule-making process could end in a slew of unintended consequences.

“In Europe, politicization has triggered some absurd episodes, such as the proposal for the greatest uncontrolled financial market microstructure experiment in the world—also known as the minimum resting period of 500 milliseconds—and the introduction of short-selling bans in the face of an overwhelmingly crushing academic verdict against them,” said Dr Christian Voigt, business solutions architect at trading and technology company Fidessa, in a recent blog.

This seemingly constant barrage of new regulation, which has been brought in to shore up capital markets following the financial crisis, is beginning to take its toll especially in Europe with acronyms such as MiFID II, Emir, FTT, AIFMD, MAD and Fatca striking fear into the hearts of many market participants.

Robert Macrae, managing director, Arcus Investment

Robert Macrae, managing director, Arcus Investment

“We are in a world where regulation is expanding perhaps under its own momentum where more regulation is seen as a good thing without a clear identification of what the benefits are going to be,” said Robert Macrae, managing director of Arcus Investment, a hedge fund manager based in London.

“I share a general concern that the response to the financial crisis has been more regulation rather than an attempt to deal with the real problems.”

Some on the buy side are also fearful that certain sections of the market are being protected whilst others are not in this new post-crisis regulatory landscape.

“Although the market has shown limited ability to self-regulate properly, in some cases the regulation is becoming slightly too cumbersome and not necessarily defending all market participants,” said Giovanni Govi, chief investment officer at Theorema Asset Management, a London-based European long/short equity group.

And it is the politicians who are attracting most of the opprobrium from market participants.

“Do politicians really have the long-term interest of Europe at heart, or are they more concerned about vote-winning headlines?” said Voigt at Fidessa, who is gaining a name for himself as something of a regulatory specialist in Europe.

“The industry wants regulators to reclaim the driving seat in the rule-making process…regulators usually have extensive first-hand experience in financial markets and they are less restricted by election cycles.”

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