The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Go West, Old Exchange!

Following the EU’s block of the London Stock Exchange merger with Deutsche Boerse, LSE could consider North American suitors with lower regulatory hurdles

By: Jim Northey, Principal Services Consultant, Itiviti

Coming as no surprise on the same day as the letter invoking Article 50 to separate the UK from the European Union, the EU on March 29 blocked the all but forgone merger between the London Stock Exchange Group and Deutsche Boerse.

The proposed merger was an unwieldy deal from the start. There were considerable questions regarding how the two companies with highly distinct operations, technological implementations, and cultures could be merged together to provide economies of scale and synergies required by shareholders. In many ways, the deal became the ultimate tale of bad timing. Due to the tsunamis of MiFID II deadlines, Brexit, and the election of Donald Trump, a deal often categorised by industry pundits as an act of desperation, came to a halt in Brussels.

Both the European Securities and Markets Authority (ESMA) and the Financial Conduct Authority (FCA) in the UK are holding to their statement that Brexit will have no impact on the applicability of MiFID II nor its January 3, 2018 effective date. One has to wonder if the political negotiations that will go on for two years will undermine the mandate behind MiFID II and the unity presented by ESMA and the FCA. One would expect that the threat (or opportunity) of regulatory arbitrage will be employed during the Brexit negotiations. The Deutsche Boerse will be relatively immune to this wrangling.

However, the LSE Group, in the presence of disparate, and possibly even conflicting regulatory regimes in the future, may be faced with excessive costs of multiple regulatory regimes. One wonders if the LSE may look west for a US or Canadian suitor, in light of the CBOE-BATS merger. One would think that after the successful digestion of the NYSE and Interactive Data Corporation (IDC) that the Intercontinental Exchange (ICE) would be a leading candidate yet again. One gets the idea that the courtship of the LSE will continue as it has for nearly 20 years. With President Trump, Brexit, and a resolute EU, regulatory arbitrage opportunities will be the area to watch.

Related content

WEBINAR

Recorded Webinar: Regulatory change management – challenges, solutions and case studies

Regulatory change has become part of the fabric of capital markets. It has also become increasingly complex as more regulations are introduced, significant amendments are made frequently, and small changes are made on a rolling basis – the whole made more difficult by jurisdictional interpretation and the UK’s amended regulatory regime post Brexit. If keeping...

BLOG

Buy or Build? For Trade Surveillance, It’s Now Time to Decide

By Joseph Schifano, Global Head of Regulatory Affairs, Eventus Systems. Buy or build? It’s a question that has long vexed capital markets firms, especially given the rapid evolution of electronic trading and the technological complexity that has come with it. Individual circumstances will vary, but between the numerous vendors and the high level of in-house...

EVENT

RegTech Summit New York

Now in its 7th year, the RegTech Summit in NYC will bring together the regtech ecosystem to explore how the North American capital markets financial industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

Trading Regulations Handbook 2021

In these unprecedented times, a carefully crafted trading infrastructure is crucial for capital markets participants. Yet, the impact of trading regulations on infrastructure can be difficult to manage. The Trading Regulations Handbook 2021 can help. It provides all the essentials you need to know about regulations impacting trading operations, data and technology. A-Team Group’s Trading...