Contorted contraptions

Emotions are running high with ESMA’s announcement last evening on the share trading obligation and the immediate response by the FCA. Doubtless market participants had hoped for a more practical approach and are disappointed in a new regime that prevents EU27 investment firms from trading stocks such as Vodafone in London after a no-deal Brexit.

While arguing what the regulator could have done, we shouldn’t forget that it is all caused by a political decision not to grant equivalence. ESMA’s new regime is poorly suited for a smooth day-to day-operation of markets. For example, what will happen after the EU revokes the equivalence decision with Switzerland in a couple of months? Will ESMA publish a similar list? This is not what principle-based regulation looks like. Unfortunately, as long as our elected leaders are incapable of finding a political compromise, the technocrats serving them will be forced to build even more contorted contraptions to deal with the consequences.

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