Brexit vote muddies the financial regulation waters for energy traders



The Monday after the Friday before, and what the UK electorate’s decision for Brexit means is still unclear. If anything, it seems more unclear now than on Friday morning, when the shock of the result made it seem like the exit would be swift. That seems unlikely now.

One of the more interesting questions (for regulation anoraks at least) is what happens to the wave of financial regulation that has already hit or was due to hit the energy trading sector based out of the UK.

Top of that list is the second markets in financial instruments directive or MiFID II, due to come into force at the start of 2018.

Energy companies have argued against being subjected to the directive, believing its impact would be disproportionate to the systematic risk they pose – could the Brexit vote give some a way out?

The UK needs to notify the EU of its intention to leave, triggering a two-year period of negotiation. MiFID II will come into force before that two-year period is finished. And until a deal to leave is signed, sealed and delivered, the UK will still be obliged to apply all EU directives and regulations. How strictly that law is applied is another question, for a different day.

It is highly likely the UK will end up in a position where either it becomes a ‘rule taker’ and still implements EU law, or in certain instances would need equivalent legislation, to allow UK-registered firms access to the EU market. Switzerland, for example, already has legislation that mirrors regulation in the EU.

Even if the UK ended up in a position where it did not have to apply EU rules and regulations, it is still unlikely the country’s Financial Services Authority or the Treasury would support a “fin reg bonfire”, as one source said.

For now at least, everything is in limbo. But given the cross-border aspect to most energy traders’ businesses, a Brexit is unlikely to create a clear way out of EU financial regulation , no matter what happens.

PS… Some other fallout comes from commissioner Jonathan Hill resigning his position as head of the European Commission’s directorate-general for financial stability, financial services and capital markets union, because he felt the result left his position untenable. Hill was overseeing MiFID II as well as a review of EMIR, among many other areas. Hill will remain long enough to ensure an orderly handover, but it remains to be seen if his departure leads to a new tone at the department.


Squaring the circle of Nord Stream 2


The planned Nord Stream extension continues to generate vigorous debate, showing...

Learn more

Brexit and UK energy investment – how long before the dust will settle?


Following on from my colleague Fionn O’Raghallaigh’s excellent blog post on ...

Learn more
More posts
Clock is ticking on MiFID II

Time is running out for energy companies that have to work out if they will be included or exempted ...

No alternative: Europe’s low-carbon energy transition will come of age in 2017

“Alternative energy”. Is that still a common phrase? In some quarters, it is. In a recent New Yo...

Should the EU get tough on the gas network codes?

Following the recent publication of the EU Agency for the Cooperation of Energy Regulators’ (ACER)...

2016 – for LNG it was the year that wasn’t

The long-awaited surge of new global LNG production has not led to the widely-expected and sustained...

Ballast bonuses sink shipping activity

The cancellation of two planned LNG vessel charters in Europe this week shows that it’s becoming h...

A crazy week in UK power. But will the madness return this winter?

In recent days, UK power has been a crazy energy market to trade in. Late in the day on 14 September...

What’s in a name? That which we call a Bulgarian hub

Bulgaria and the European Commission have recently been announcing, with much fanfare, the country i...

This winter it really is about the weather

The cliche about weather driving energy prices, in particular on European gas and Asian LNG, is just...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more