European Regulator Budges on Equity Trading Rule Ahead of Brexit
European Regulator Budges on Equity Trading Rule Ahead of Brexit
(Bloomberg) -- European Union-based investors should be given an easier time trading some of the world’s most popular equities on foreign markets, including possibly in the U.K. after Brexit, according to recommendations from the bloc’s top markets regulator.
The Paris-based European Securities and Markets Authority said Thursday that current EU restrictions go too far and should be scaled back to help investors access the most liquid markets and get the best prices for their trades.
The recommendation comes at a fraught moment in broader Brexit negotiations, with the EU indicating it’s not ready to open access to many parts of London’s financial markets. For the past year, the EU has dropped equivalence recognition of the Swiss stock market in a Brexit-related standoff, forcing the repatriation of trades in EU-based companies’ shares.
ESMA’s proposed approach “would largely fix some of the equity-trading issues posed by Brexit, by allowing EU firms to trade U.K. stocks out of London,” said Anish Puaar, a market structure analyst at Rosenblatt Securities.
ESMA has faced calls to reconsider the rules by firms including London Stock Exchange Group Plc, JPMorgan Chase & Co. and BlackRock Inc. If the regulator’s new guidance is adopted as policy, EU-based investors would be able to trade EU-based shares on non-EU trading venues when the trades are done in the local currency.
The post-Brexit transition period is set to expire at the end of this year, and deadlocked trade talks have raised the specter of a no-deal exit. While ESMA said the issue is wider than Brexit, that process has highlighted concerns about the scope of current policies.
The regulator made its recommendation in an assessment of MiFID II, the bloc’s signature securities regime, and will be sent to policy makers in Brussels. Lawmakers there are currently debating rollbacks to MiFID, and ESMA’s views could influence those discussions.
“I wish that ESMA had gone further and binned the rule entirely and allowed traders to trade without these restrictions,” saidSam Tyfield, a lawyer at Shoosmiths LLP who has acted for trading firms.
©2020 Bloomberg L.P.