Last night the UK population voted to leave the European Union, by a narrow margin. Such an exit will clearly have regulatory implications for energy and commodity market participants who are covered by rules such as EMIR, REMIT, MiFID II and MAR. There will be a particular impact on UK based market participants, but also on those who remain within the EU.
Some commentary on the topic has already been issued. The CTRMCenter have issued this post, which finds that the UK energy market infrastructure is unlikely to be impacted too much, at least in the short term. Commodities now have issued this article on the possible impact on the commodities markets.
On the financial side, the FCA this morning issued this statement, reminding the market that MiFID II starts before any possible exit, and will therefore still apply. Similarly MAR starts on the 3rd July, and it is hard to see how any prospect of Brexit will lessen the appetite of financial or energy regulators to reduce their focus on possible market abuse which has been building for several months. ISDA have also issued this statement, and have made this study of the likely legal process around the exit.
Considering how a future world might look, it is worth examining how the non EU European states already handle regulations. Switzerland has its own version of EMIR, FinFrag, which starts to come into force next year. Market participants within Switzerland have already had to comply with EMIR, and will now need to comply with a second set of rules. On the REMIT side, Elcom’s rules have already partially started, again making life more complex, for anyone transacting a cross border trade.
Given that the UK based regulators have been meticulous implementers of the EU based legislation, and considering that much of it has arisen from G20 principles. it is hard to see any of the rules disappearing for UK market participants as part of the exit. Instead, the regulatory world will possibly become more complex, not only for UK market participants, but for those outside as well. Only time will tell how the story will pan out.