Lack of competition in European derivatives has robbed both participants and consumers of choice; this in turn has led to high costs for both trading and clearing, as well as a failure to innovate and improve the servicing of clients.
It is essential on the back of positive regulatory moves that market stakeholders act in the spirit of competition and embrace it. This should include fair treatment of new entrants and acceptance of the devices they must inevitably use to gain traction and market share against incumbent monopolies.
These strategies are little different from those such monopolies themselves pursued to launch new or gain market share in existing products – every successful launch provides an example. Resorting to what may be perceived as anti-competitive behaviour will certainly be seen as a crude and thinly veiled attempt to stamp out new competition, against the interests of all market participants.
Higher trading and clearing charges drive up expenses for end users such as pension funds or mortgage companies for the instruments they use to hedge their risk, which in turn adds cost to the essential products they offer. Furthermore the services, infrastructure and technology of equity markets have advanced rapidly post-MiFID and have been a key part of the initial success of multilateral trading facilities over many incumbent exchanges. That contrasts with the lack of innovation in derivative markets.
The direction for the industry is clear: competition is coming; for both regulators and the market are demanding it. The real question is, will those in the market who hold the reins choose to fight it, or embrace it and let the customers decide who offers the products and services most appropriate for them?
Full article (subscription)
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article