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What exactly is the UK worried about?
European market infrastructure regulation
A proposal to overhaul infrastructure for trading and processing over-the-counter derivatives, write Alex Barker and Jeremy Grant. Most derivatives clearing is based in London but Britain failed to persuade other European Union members to extend pro-competition provisions to exchange traded derivatives, which would benefit the London Stock Exchange.
Markets in Financial Instruments Directive and Regulation II
Sweeping rules designed to rein in OTC equities and derivatives markets and move more trading activity on to formal exchanges, in the interests of transparency.
Backed by the UK for the most part, but it has big implications for the City of London – home to the bulk of wholesale financial markets business. MiFID II also cracks down on rapid automated trading, hitting traders in London and Amsterdam.
Capital Requirements Directive IV
The EU vehicle for implementing the Basel III banking accords. Michel Barnier, internal market commissioner, riled UK ministers by proposing a “single rulebook” for Europe with a capital ceiling, which stripped UK regulators of the power to set a higher standard. Provisions that ease capital definitions – to the benefit of some French and German banks – also dismayed British diplomats.
European Securities and Markets Authority
A powerful new pan-European watchdog based in Paris that tilts the balance of market regulatory power away from national regulators. After backing its establishment, Britain has resisted attempts to beef up its powers.
Mr Barnier sees strong pan-European regulators as essential to creating a single market. But London fears it is a vehicle for discriminatory policies against the City. ESMA will make rules on investment banking as well as clearing houses and trade repositories (electronic data warehouses) for over-the-counter derivatives – significant since most are based in London.
Financial transaction tax
A proposal backed by Mr Barnier. To Britain, this would be damaging to the economy and a bad way to raise taxes on financial services. The UK also sees the move as the eurozone pushing for a tax that would raise most of its revenue from London.
Short selling curbs
Britain lost a fight against imposing curbs on short-selling equities and on “naked” credit default swaps – measures it sees as likely to backfire.
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