OUT WITH THE OLD…
There is no doubt that 2015 was a year full of twists and turns. Few would have predicted Greece almost falling off a cliff or the Chinese stock market crashing in the summer. Worse still were the unspeakable and horrific events in Paris. They all left indelible marks on asset prices although the terrorist attacks were also a reminder of the fragility of life.
The irony though is despite the unexpected events, there are several issues that we have covered in 2015 that will still be plodding along in 2016 and beyond. MiFID II is a case in point, having just been delayed to 2018. It may give everyone more breathing room but only the brave would put this on the backburner as time goes quickly. This means not only focusing on the IT infrastructure required but also the amendments to dark pool trading, meeting best execution and the unbundling of research.
Collateral management will be an even bigger theme as a date has finally been put in the diary – June 2016 – for the clearing of OTC derivatives under the European Market Infrastructure Regulation. Views still vary as to the shortfall but firms will have to ensure that their systems and processes are in place to meet the deadline. Once an instrument is at the clearing starting gate it will be the European Markets and Security Authority’s (Esma) turn to develop technical standards for MiFID to determine the class of derivatives subject to the trading obligation and the launch date.
Although Europe seems to be finally getting its regulatory act together, this does not seem to be the case between the region and the US, who are still wrangling over the finer points of clearing. Aligning their regimes was never going to be an easy task but few thought it would take this long. It is unclear whether 2016 will be the year where they can put their differences aside and reach an accord.
Uncertainty is also lingering over Britain’s place in the European Union. The referendum to leave, or Brexit, could take place in 2016 or 2017 but it has not been factored into equity prices and analysts believe that it would pose a big shock because few take the possibility seriously outside the UK. This is perhaps because they don’t believe the population would seriously consider a Brexit. Little do they know and let’s hope the yes campaign can convince them of the merits of staying in despite the many problems.
Looking ahead is always difficult and last year’s crystal balls are no doubt cracked. However, the one thing that is certain is that the regulatory saga will continue having a profound impact on the financial service community.
Wishing all our readers a happy holiday and New Year.
Lynn Strongin Dodds