Open access may “never come into effect” – FCA

The European legislation to spur competition between exchanges known as open access “may never come into effect” amid opposition from member states, a manager at the UK regulator has warned.

Speaking on a video conference on Wednesday, Stephen Hanks, a manager in the Markets Policy unit of the Financial Conduct Authority said the prospects for the open access provisions as defined under the European Union’s Mifid II regulation were uncertain.

Hanks told the video conference: “I think potentially what will happen, and obviously we are not part of these discussions in the European council, is the exemptions will be extended and then there would be a reflection in the Mifid review as to whether or not the open access regime should be maintained in Mifid.”

Mifid II took effect across Europe in January 2018 but the open access rules were delayed by 30 months, meaning they were set to take effect in the coming weeks, but reports emerged this week that some member states have called for a further extension.

Hanks said: “I’m not certain exactly where that will end up but it is fair to say there are relatively few member states who are enthusiastic about the open access provisions so there must be a possibility that, in respect of exchange-trade derivatives, they will never come into effect.”

The open access rules are contentious because they propose to expose exchange monopolies to competition in the hope of driving down prices and encouraging innovation but they have been resisted by most European exchanges.

London’s LSE Group is the only major exchange to have publicly backed the open access provisions but chief executive David Schwimmer acknowledged in late February they are not universally popular.

Schwimmer said: “As it relates to Mifid II, it is true open access has not really come into play. We believe it is the right market structure and we will continue to operate under open access but I’m not in a position to be able to dictate what regulators or competitors will do.”

The European Commission opened in mid-February a public consultation on the Mifid II regulatory framework for investment firms and market operators, namely exchanges, banks and brokers.