Top Regulatory Issues Traders Should Pay Attention to in 2018 – Introduction
We are at an age of divergence among the developed countries. In the United States, the new administration has vowed to shred regulations, which they believe impact investments negatively. They have declared war on regulations.
In a recent press conference, the president said that his target was to bring down regulations to the level of 1960s.
Among the targeted regulations are the financial regulations like Dodd-Frank that were put in place after the financial crisis.
On the other hand, in Europe, the toughest financial rules will go in effect on January 3rd. The new regulations are called MIFIID II, which are an iteration of the first MIFIID, which was initiated before the crisis.
These regulations, which comprise of millions of pages, will affect traders, asset managers, brokers, and all trading companies. No one will be left out.
For brokers, they will be required to improve and increase the recording of transactions that their traders do for a period of not less than 5 years. They will also be required to hire compliance officers. Also, brokers who provide daily updates or reports for free will be required to sell them to the traders.
For traders, they will be required to submit more information. The most to be hurt will be high frequency traders who use algorithms to trade. They will be required to submit their algorithms to regulators and register as investment firms. Imagine that.
Every person who is involved in the financial market should learn about these regulations.
Another area likely to face heightened regulation is in the cryptocurrencies. These currencies are changing the global financial system. This week, the combined value of these currencies crossed the $500 billion mark. This means they are $300 billion shy to match the defense spending of the United States. They are worth more than companies like IBM, NVIDIA, Salesforce are, and Tesla combined.
As a result, there are growing calls to ban or regulate these currencies. Recently, China banned the exchanges and the Initial Currency Offerings (ICOs). However, as they found out, regulating these currencies can be hard. This is because they cannot be tracked, traders continued to trade on them in the over the counter exchanges.
In the United States, the outgoing Fed chair has called them highly speculative assets and in Australia, the central bank governor has called them bubbles.
This year, to protect investors, many governments will join hands to create regulations to govern the currencies. This is particularly because of what happened a while back when a South Korean exchange was hacked into.
Another area to watch in terms of regulations is in the United Kingdom. As you know, the UK is one of the most highly regulated countries especially because of its association was the EU. The following year, the Brexit negotiations will continue and it is highly likely that the UK will follow the footsteps of the United States in deregulating the industry.
Traders should also focus on the social media and digital companies like Google and the regulations that will affect them especially in the EU. This year, Google was fined more than $2 billion by the EU regulators. Traders should understand that these countries are not liked overseas because of the power that they have. In the coming year, I expect more fines and tougher regulations for these companies.