For the past 47 years, the UK has been able to influence EU legislation. Now, less than a week after Brexit, Brussels are looking to tear up the concessions made to Britain about its financial rulebook.
The EU’s Markets in Financial Instruments Directive (MiFID II) is a famously complicated piece of legislation that regulates everything from financial reporting and research reporting to how to trade in stocks, derivatives and commodities.
The law was implemented in January 2018 after four years of haggling between the member states, including making several concessions to the UK.
Experts have speculated that MiFID II might change after the UK pulled out of the EU on January 31. It seems like those amends might already be on their way.
EU officials are reportedly flagging that the bloc might remove the concessions made to Britain, leaving the UK’s financial sector in a weaker position, according Bloomberg.
The changes could include the so-called open access rule and the requirement for money managers to pay for investment research separate from trading services. Europeans have argued that the rule permits predatory pricing by bigger firms.
Markus Ferber, a German member of the European Parliament, told the publication that it would be “naïve” to think that the EU would not change the financial rulebook after Brexit.
And the changes might begin within days, with lawmakers apparently looking to seek initial feedback from banks and other firms within the next few days.
If the changes happened, it would be very difficult for the entire British financial services industry to keep doing business as usual, according to the report.
UK firms will rely on equivalence, the process of deciding whether or not British laws are equal to the ones in the EU, for their ability to trade in the EU.
““Combining the MiFID review with equivalence allows them the possibility to move the goalposts for equivalence, which could very well give the EU more leverage,” Nathaniel Lalone, partner at Katten, the London law firm, told Bloomberg. “There is a risk that the MiFID review could be misused for political ends, which could ultimately, and regrettably, serve to frustrate access to EU markets by City firms.”
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