Banks have long complained the volume and speed of
regulatory change is keeping them so busy that they have no
time to focus on their day jobs. But, even by recent high
standards, this week has been exceptional.
A few weeks after its publication banks are starting to come
to terms with the more incendiary aspects of the Mifid II draft
proposals and they are getting particularly animated about
plans to regulate electronic trading.
Under the current proposals all firms trading in Europe must
register with a European regulatory authority which could also
require them to open an office in the region.
The banks are under no illusions what this would mean. Put
simply, thousands of their US and Asian clients will stop
trading in Europe, which will bad for the clients, the banks,
Europe’s exchanges and the European market at
The banks are raising the alarm in the hope the proposals
will be watered down or tinned altogether before the rules are
fixed, perhaps in the early part of next year, but there is
real concern this regulation could yet make the final cut.
The irony is, of course, that Europe is seeking to introduce
a condition which has become a point of contention between it
and the US, which has similarly draconian requirements around
And now the Securities and Exchange Commission (not the
obvious protagonist as the regulator of the US stock markets)
has waded into that debate, claiming non-US branches of US
banks must be bound by the same rules as their parents.
Some US banks have sought to swerve Dodd-Frank by setting up
subsidiaries in Europe to handle swaps trading on behalf of
their non-US clients.
These units are legally and financially ring-fenced from
their parent groups so should not drag their parents down if
they got into trouble, which is the US
government’s main concern.
But the SEC is taking no chances apparently and wants to
extend the reach of Dodd-Frank to include these international
units, potentially another blow to Europe’s
financial institutions and markets.
Lastly, the US House of Representatives, where the
Republicans hold the balance of power, has this week passed a
new bill that offers US farmers and ranchers exemption from
The world’s top banks will surely draw huge
comfort from the fact that US rednecks are safe from Dodd-Frank
but they could be forgiven for wondering when this regulatory
maelstrom is going to end.
One firm that seems to be thriving in this new regulatory
reality is the London Stock Exchange which this week unveiled
its largest ever takeover.
The £1.6bn acquisition of Frank Russell, the US index
and fund management firm, from its owner Northwestern Mutual is
still subject to shareholder approval which will be established
by a vote in September.
The deal looks like a good one for Xavier
Rolet’s LSE as it takes the British exchange into
the US and adds to its credentials as a global index
The £1.6bn price tag looks good also based on the
fundamentals and the LSE can expect to get some cash back when
it sells the Russell asset management business.
The LSE said on Thursday it would undertake "a comprehensive
review of Russell’s investment management business
to determine its positioning and fit with the group".
The British exchange is not saying it in so many words but
the bottom line is the asset management business
doesn’t "fit with the group" so they will look to
spin it off at some stage and could raise as much as
£700m for the sale, according to analysts.
Another bad week for the banks and another good week for the