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Regulatory ruminations: what will be the impact on market infrastructure in a year's time?

First Published 21st November 2012

What impact will the regulatory freight train have? Consolidation of industry players, even slower market activity, the fruits of interoperability… These are some of the predictions made at one recent conference on what we'll see a year from now.

Diana Chan, CEO, EuroCCP

Diana Chan, CEO, EuroCCP

"That regulations will slow down market activity is clear; it is just the magnitude that still has to be seen."

Frankfurt - German politicians have been among some of the most eager to introduce stricter curbs on financial trading, but they are by no means alone. Against that backdrop several exchange and clearing leaders at a recent FIX Protocol panel in Germany were asked to peer into their crystal balls and tell us where we'll be in a year's time.

Here are some of their views.

Diana Chan, chief executive of EuroCCP:

"The regulatory process is necessarily a slow one. This time next year, I do not see a substantial shift in the major things the industry is concerned about."

"That regulations will slow down market activity is clear; it is just the magnitude that still has to be seen. Regarding the interest of the buy side in regulatory issues on market structure, the PR effort needs to be at least double of whatever it is at present ... primarily because the buy side gets services from intermediaries and is shielded by firms competing for its business. The buy side is for the most part one step removed from the regulations."

She likened it to the challenge of getting car buyers interested in the price of steel and said FIX had an important role to play in helping the buy side to recognise the effects of regulations on market structure and investment returns.

Rainer Riess, managing director, stock market business development, Deutsche Börse:

"I would think 12 months from now we certainly will have seen a lot of consolidation of various buy sides, sell sides and execution venues. I think this is a time where people reconsider their business strategies. I think players that don't have scale or are not in the proper niches probably will exit the business. That's something I would predict as a trend. Secondly, I hope … we'll have a lot more clarity, although that process is quite slow - MiFID II and many other regulatory streams hopefully will be finalised. I think that will be quite paramount to move forward in the industry."

"FIX is important as a standard in Germany. I think a lot of banks in the retail space will switch to FIX connectivity for their business in 2013. I think we'll see more standardisation in the next 12 months."

Albert-Jan Huizing, chief information officer, EMCF:

"Although it's quite a massive amount of work to prepare the application, to go through the process, in the end I think it's very beneficial to the industry to have a level playing field for CCPs. There will be a European passport enabling CCPs to provide services across Europe. Now what that could mean for the industry, is that it makes it possible to offer the benefits of interoperability to a wider community and to the customers of exchanges that have not yet been able to enjoy these benefits."

"I expect… that the cash equity area that much more of what is currently done OTC cleared bilaterally will come to the CCP layer in the infrastructure to strengthen the process there."

Alistair Haynes, chief executive officer, Aquis Exchange:

"I think the euro will be in turmoil. I think there will be little change in regulation as politicians focus on other issues, more notably survival for them as elections loom. And I think there is a strong argument for market practitioners to get together as a group and that's where FPL comes into its own."