01/02/18

Michael Spencer favours Brexit rollback of ‘over-engineered’ Mifid II

 (Financial News)  -- Michael Spencer, the City grandee and chief executive of NEX Group, would be in favour of "peeling back" elements of new European Union trading rules following the UK's exit from the bloc.

The second iteration of the Markets in Financial Instruments Directive went live on January 3 and  introduced strict rules designed to increase transparency, stability and competition in the industry.

However, there have been hiccups in ITS implementation, including disputes about market data costs and confusion around trade reporting. Gina Miller, co-founder of investment manager SCM Private, consulted lawyers about suing the City watchdog over its implementation of Mifid II.

Spencer  told reporters on a call accompanying NEX's third-quarter results: "Overall, I think Mifid II is materially over-engineered and is an overly complex piece of change."

He added: "We're well aware of course that other institutions — certain exchanges and indeed our own regulator here in the UK — have struggled with Mifid II. If we were at any point to have a review of Mifid in the Brexit environment I would personally be in favour of peeling parts of it back rather than adding more layers to it but that is some way down the future I imagine."

Spencer's comments followed a Financial Times report on Wednesday that the EU is planning measures to block Britain from loosening regulations following Brexit.

He was speaking after NEX reported a 5% year-on-year rise in group revenues in the three months to December 31. The company, which did not disclose a revenue or profit figure, said it expected its effective tax rate to fall to 22-24% next year from 26-28% this year, driven by US President Donald Trump's changes to US taxation. Shares in NEX were up 7.6% mid-morning in London.

NEX, which operates trading venues for fixed income and foreign exchange products, also runs an Optimisation unit that, among other things, helps banks and investment managers meet Mifid II's regulatory reporting requirements. This business line now has 380 customers.

NEX's markets business, which houses its trading venues, saw revenues fall by 9% in the third quarter. The Optimisation arm saw revenue rise by 13%; the division had a difficult 2017 with a squeeze on profitability — its former leader, Jenny Knott, left in October.

NEX was created late in 2016 when Spencer's storied interdealer broker Icap sold its voice broking unit to rival Tullett Prebon, which is now TP Icap, for £1.3bn.