London, the world’s largest financial center, will today be facing a dichotomy in terms of how it can perform its business with its international partners, as for the first time ever, the UK Independence Party (UKIP) rose to victory in the European Elections, gaining 27% of the entire vote, outpacing the traditional Conservative and Labor parties.
Since Britain joined the European Union, the debate as to whether membership is conducive to a good economic situation in Britain had escalated, with proponents and opponents having been equally vocal, particularly subsequent to the global financial crisis which resulted in a large burden having been placed on London’s financial sector as many of the large banks became nationalized and the nation had to take its part in bailing out other European member states with insolvent economies.
Whilst UKIP maintains that its withdrawal from the European Union, if given a mandate to do so, would ensure Britain’s independence, there would be strong trade ties with Europe. The question that is likely to be in the minds of most institutional FX firms which provide services to broker partners in Europe could well be whether the economy of the United Kingdom may recover at a faster rate without the burden of other dependent states, or indeed whether doing business overseas may become more complex.
UKIP won 27.5% of the vote and had 24 MEPs elected. Labor, on 25.4%, has narrowly beat the Conservative party into third place while the Liberal Democrats lost all but one of their seats and came sixth behind the Green Party.
Currently, the European Parliament is in the process of implementing the European Markets Infrastructure Regulation (EMIR) which although seeks to instigate stringent trade reporting regulations and improve transparency within European electronic trading businesses as well as having taken a dim view of High Frequency Trading (HFT) and the use of algorithms.
If UKIP is successful in its aim of removing Britain from the European Union and restores its ability to be a self-determining, sovereign nation, London’s trading desks may well be well positioned to lead the region in automated and algorithmic institutional trading, thus going some way to reversing Barclays Bank’s recent downturn in fortunes, or alternatively UKIP’s status as a relatively unknown quantity may have its own downsides, despite its leader, Nigel Farage, having previously served a career within London’s financial sector.
On the retail side of the business, many London-based firms provide liquidity and technology to brokers based in Cyprus, currently aligned under the pan-European MiFID passporting system, however if Britain leaves the European Union, the Financial Conduct Authority could indeed be at will to require all brokers wishing to do business in Britain to be licensed in Britain, as well as view it as a practical solution toward mitigating the risk of accepting commercial accounts following Cyprus’ banking sector failure last year.
As with most new phenomena, time will tell, although in this age of technology and rapid change, it may be sooner rather than later.