Interesting to read over the weekend that London’s mayor Boris Johnson has decided to throw his charismatic and not inconsiderable weight behind the “NO” campaign. Most agree that this shifts the possibility of a Brexit from remote to now distinctly possible. I wonder, therefore, what this means for all the rules we are in the midst of implementing as part of MiFID, EMIR etc. Theoretically none of these rules would necessarily apply, which would leave the UK potentially in a bit of a mess. Of course other European countries such as Switzerland and Norway, that are not part of the EU, mirror the MiFID rules as this makes interaction with their trading partners easier. But they are not forced to, and equally don’t have anything like the trading activity that happens here in the City on London. So it would be up to UK regulators to decide if, how and when they implement the rules coming out of Brussels. This might create the temptation to re-examine some of the more controversial aspects, such as the dark pool trading caps or payment for research. Would this in turn lead to a rethink in Europe so that it doesn’t fall victim to regulatory arbitrage? Or would we end up with the kind of interminable mutual reciprocity dialogues we have between the CFTC in the US and ESMA here?

I guess the point is that whether the UK likes it or not, and whatever the rules, it is intrinsically part of Europe. However onerous some of those rules are, creating and playing by different ones will only make things more complicated and increase the frictional cost of trading.