Thomas Murray wishes to share some preliminary thoughts concerning the United Kingdom’s decision to leave the European Union, as pertains to the financial industry’s post-trade services. These are the questions we will be asking ourselves as this transformational project takes shape in the coming years. This piece introduces a series of five articles that will be posted in the days and weeks ahead. As policies get clarified in the months to come, the firm’s further reflections will become progressively more detailed.
Forty-three years after joining the European Community, the UK’s capital markets are deeply interconnected with those of the 27 other member states of what has since evolved into the European Union. The decision for the UK to leave the EU will have a substantial impact on the financial services industry, as on every other aspect of British society.
Nearly two months on from the UK’s Referendum of 23 June, the UK government has provided very little in the way of government policy. This is quite understandable seeing as the government itself changed significantly in the weeks following this historic decision. Any substantive work offered by those who campaigned for the UK to leave has been conspicuous only in its absence. Prime Minister Theresa May and the government were left with essentially a blank sheet of paper from which to work.
Moreover, no matter what the UK government proposals will be when Article 50 is invoked to set the separation process in motion, none of us has any firm idea of what the 27 Continuing-EU member-states will put on the table as counter-proposals. Nor does any one of us know what the outcome of the negotiations will be. Or the timetable.
With such massive uncertainty, speculation is rife, but also futile.
Thomas Murray’s first questions as to how this will affect post-trade infrastructures and custody providers working or based in the UK are very general:
The UK participates in the formulation of these global standards. The UK’s financial market regulation and practice cannot wander beyond this framework.
Any Briton voting to exit the European Union with the objective of regaining national sovereignty is likely to discover, upon further observation, that no government has the ability to act entirely independently of its neighbours and competitors when it comes to capital market operations. UK-based central securities depositories, clearing houses, trade repositories, banks providing custody services are not going to get the answers to these questions anytime soon.
The articles to come will delve into these matters in greater detail.