Post-Brexit questions loom over Europe

The post-Brexit environment is still quite hazy, but the politicians and regulators in the EU are trying to lay markers for future discussions and negotiations. There have been several comments that betray a fear of further demands for exits from  the EU by the politicians and citizens of other countries that have high levels of Euro-scepticism, such as the Netherlands, France and Greece. 
The French president recently stated that clearing for Euro-denominated securities would no longer happen in London and this "could serve as a lesson" to those who are questioning the need for the EU. Strong words indeed for a market that currently gets jittery at the drop of a hat. In a similar move, the president of the German financial regulator, BaFin, has  also expressed doubts on the possibility of the LSE-DB merger if the resultant entity is based in London. The exchanges themselves have mentioned their intention to go on inspite of the added complexity due to Brexit, but I am sure they are keeping an eye on the political headwinds that are developing around them.
On their part, the British politicians and regulators are trying to calm the markets down and lull them into believing that little has changed in the aftermath of Brexit. The desire to delay invoking Article 50 to officially confirm UK's demand for exit is an example of this strategy, although EU leaders are opposed to this move. The claim by the politicans who supported Leave that there would not be any major and immediate economic or financial change after the referendum is another attempt of this nature.
While both these parties would probably be interested in discussing the issues that have arisen behind closed doors, in public they have to make the right noises to ensure damage control. There is also anger and resentment in the EU at the UK's decision and this shows from time to time in some of the comments. The German Chancellor Angela Merkel has a very balanced attitude to Brexit, but she has also conceded that the UK cannot enjoy access to the EU single market the same way as it did earlier, something that was suggested by Boris Johnson. There is a genuine concern in the EU to prevent cherry-picking in this regard. 
The various questions that have arisen post-Brexit will take a while to be answered. But what is clear is that there is going to be a significant parting of ways and the separation is going to be less than amicable, at least in public. For capital market professionals, in this landscape the discussion ends up being about political rather than economic or financial issues, in spite of trying otherwise. The latter have to take a backseat at time like this and this might continue for the weeks and months to come.

French effort to use Blockchain for SMEs could have relevance for emerging markets

The recent news that a French consortium is beginning work on building post-trade infrastructure for trading of SME stocks in Europe will be of great interest to market participants across the world. The consortium comprises of BNP Paribas Securities Services, Euronext, Société Générale, Caisse des Dépôts, Euroclear, S2iEM and Paris Europlace.

There have been several notable developments with regard to experiments and adoption of Blockchain and distributed ledger technology in the leading capital markets globally. However, the signficance of this particular announcement lies in the fact that it tries to address the needs of the a sector that usually struggles to obtain easy access to the capital markets. If successful, such a project could drastically reduce the time taken for post-trade operations, slash costs and generally make it easier for SMEs to raise funds.

In a recent Celent report, we had found that most of the leading global post-trade providers believed that it was still a little early to expect major changes due to Blockchain technology. While this may be true, the current development would be of a lot of interest to the emerging markets around the world. In several such countries, the cost of accessing capital markets is comparatively high and the technology is also often found lagging, as in the case of European SMEs. If the French effort becomes successful, it could pave the way for application of Blockchain technology to specific tasks in emerging markets, not just to enable SMEs to raise capital better, but to help the overall market to leapfrog in terms of modernizing the market infrastructure.

Regulators and market participants in emerging markets should now see Blockchain and distributed ledger technology as a relevant means for streamlining their trading infrastructure. To that end, it is also important that they encourage firms within their jurisdiction to experiment and adopt such technology for specific local applications and requirements, and not just wait to see how it evolves in mature markets in the next few years. 

Sizing the retail investor market: an analysis of the Western European market

In the second of three reports that analyze the retail investor market, this report addresses six Western European countries with respect to their retail investor market, country’s overall economic health, regulatory drivers, and wealth management market maturity and sophistication. Celent will conclude by stating its findings on these six countries and in which of these countries wealth management solutions providers should focus their attention in the near term.  The other report in this series is entitled, Sizing the Retail Investor Market: An Analysis of the North and Latin American Markets and Sizing the Retail Investor Market: An Analysis of the Asian Market. The following countries are included in this report: France, Germany, Italy, Spain, Switzerland, and the United Kingdom. European retail investors are a diverse group with differing levels of affluence, investment knowledge, preferences, and expertise. Factors such as investor confidence and regulatory reform in the aftermath of the financial crisis and the ongoing European debt crisis are some of the many factors influencing the size and characteristics of the retail investor market. Since the financial crisis, there has been a mixed growth rate across Europe in terms of retail investor population. A few of the many factors contributing to the retail investor population growth rate include: cultural and historical views towards financial markets, loss and recovery of financial asset due to financial crisis, and more stringent regulations of financial markets. It is without question that the financial markets play a significant role in European household and personal wealth regardless of country (albeit to varying degrees). The other report in this series is entitled, Sizing the Retail Investor Market: An Analysis of the North and Latin American Markets and Sizing the Retail Investor Market: An Analysis of the Asian Market.  This series of reports will be available to subscribers in Q2 2014.

The European Retail Online Trading Market: Trends in Europe and the Nordic Region

My upcoming Q1 report, The European Retail Online Trading Market: Trends in Europe, and the Nordic Region endeavors to identify trends in the retail online trading industry across Western Europe, Eastern Europe, and the Nordic region. The European retail online trading market remains dynamic in nature due to challenging economic conditions, stringent regulatory reformations, varying client expectations, and narrow commissions and interest rates. Retail investors continue to be a diverse group with differing affluence levels, investment knowledge and skills, and trading preferences.  Technology continues to play a significant role in how businesses will expand their existing client base and access new clients in the current environment. The following countries are included in this report: France, Germany, Italy, Spain, Switzerland, United Kingdom, Czech Republic, Hungary, Poland, Romania, Russia, Denmark, Finland, Norway, and Sweden. This report will begin with a market overview of the European retail online trading market, including market and technology trends, followed by market sizing of each of 15 European countries including a further segmentation of each country’s self-directed investor market.  Celent will then review investor product preferences and product availability, as well as channel development as it relates to digital strategies. This study examines the online brokerage market, looking specifically at drivers, technology, challenges and opportunities as they relate to retail investor online trading. Investment product preferences and availability across Western Europe, Eastern Europe, and the Nordic region vary slightly from one another due to cultural and historical investment preferences, sophistication of the country’s financial market and impact of the financial crisis on the market and investor confidence. Technology continues to play a significant role in how businesses will expand their existing client base and access new clients in the current environment.  With the proliferation of the internet and affordability of smartphones, the way in which clients prefer to perform banking or trading activities is evolving. Firms continue to outsource and partner with external vendors in the current cost controlled environment in which they currently operate. The continued enhancement and development of online trading platforms, mobile apps, social media presence, and social trading platforms are at the forefront of firms’ strategic plans. The degree to which European firms respond to these investor preferences varies between country and region.