Spring forward or Fall backwards as the clock ticks toward Mifid
By Richard Matthews
With less than 90 days to go to the implementation of Mifid II in Europe it feels that at long last people are waking up to the fact that wide ranging changes throughout the financial markets are going to happen. No arguments no more delays, when the bell rings on the first trading day of 2018 we will all enter a brave new world of regulation. Everything from the way research is disseminated, prices are quoted and foreign exchange is reported will change. To old market hands the scope and range of the changes are quite awe inspiring and at times look as if they have been designed purely for the regulator to interfere and have oversight on parts of the market that they have never been able to influence before. That’s is certainly not saying that there are areas that previously they should have looked at in more depth, such as the obscenity which is binary options that still trundles along seemingly unencumbered by any thought to the poor people that get conned. However the crucial point to me is that we have new regime without having any cost benefit analysis taking place. Now that’s a great idea isn’t it?
I was going to write purely about markets and Mifid this week as I felt that I had discussed geopolitics enough in the last couple of weeks. But it is impossible to ignore the real world. A world in which the implications and worries of Mifid pale into insignificance. A world where in recent months the battles of conflicting nation and state have been at the forefront of many at first seemingly disconnected events. In Puerto Rico a devastating hurricane has ripped through this impoverished country and one wonders whether the reaction of America would have been different and quicker if Purto Rico had been a fully-fledged state. How many years will it take this beautiful country to recover and how will it do so without billions of aid from America. Puerto Rico was bankrupt before the hurricane and now its muni bonds are next to worthless. Sometimes though, when one is touched personally by a tragedy (my mother in law is Puerto Rican) you realise that market reactions are only blips on a screen and insignificant when compared to losing a home or having to drink rancid water. The implications of this hurricane season go much further than normal and will reverberate for months if not years to come and I will return to these in a later column.
The relationship between a Nation –State and its people lie towards the root of some of the issues in the rebuilding of Puerto Rico but are clearly more evident in Spain’s relationship with its constituent Nations. The Catalan question continues and Madrid’s answer has been to clearly threaten to suspend the autonomous status of Catalonia. Regardless of the legality of the referendum that the Catalan government organised, the subsequent treatment by Spain of the Catalans is reminiscent of the Fascist years of Franco and brings back uncomfortable memories for much of the population. The sight of Fascist salutes in the streets of Spain and the far right making gains in Holland, Germany , France and Austria is of deep concern and as Europeans we really need to look deeply into our souls. Sadly though the “leaders” of Europe stand by and allow Rajoy to behave in a dictatorial manner and no attempt to reign his government in is made which is pointer to their real feelings.
Do not think this is an oversight by Europe. The treatment of Great Britain and Catalonia, all though on the face of it very different is actually quite similar. Both are being treated as if they are recalcitrant children as the Teachers in Brussels issue dictums “You will follow the mantra of federalism or we will punish you”. Shouldn’t they really be looking at these issues and acknowledging that there is a deeply seated problem with the whole idea of a federalist Europe? Further afield Iraq looks set to rush Kurdish dreams whilst in Europe Poland continues its stance against ( can I say Isamification?) immigration . All the while the arrogant idiot leaders stand aghast in Brussels.
The demands of Europe for a settlement from the UK look increasingly controlling and arrogant and it seems to me that now the UK government, rather in the way the Catalans have done to Spain, are sucking Europe in. PM May, whatever you think of her, was very conciliatory in her recent “European” speech in Florence. Predictably the hand of friendship was rejected and it now feels as if she has created a scenario where the UK is being seen to be forced to walk away with no deal and I believe this is exactly what will happen. Divorce alimony to Europe? As a trader would say, and I wish the UK would echo “Yeah lovely mate , where’s the prenup ?”
May we live in interesting times is and overused cliché but with the geopolitical events and risks that we have seen develop over the summer coupled with interest rate rises and the impending, none too premature, ending of the crack cocaine of the markets QE we are in for an interesting Autumn and Winter which hopefully the implementation of Mifid won’t slow down too much. Oil, Gold, Commodities let alone indices and currencies have all been, and are still , affected by the events that I have mentioned but the real losers are the poor people and please lets pause and remember them .
Richard Matthews, who began in career in 1973, is a former trader-broker in the London money, futures and foreign exchange markets. Twitter @dickiematthews5
This column is the opinion of the author and does not necessarily reflect the opinion of LiveSquawk.