The Financial Big Bang 30 Years On: The Times Have A-Changed
How the deregulation of London's capital markets structure in 1986 has led to large amounts of regulation in 2016.
Bob Dylan recorded the iconic song The Times They Are a-Changin' in October 1963 and 53 years later, it is just as relevant as it was back then. It was another October, however, that introduced a seismic change to the capital markets; this one in 1986 with the advent of what has come to be known as the financial "Big Bang."
October 27 marks the 30th anniversary of the deregulation of the UK securities market, whereby Margaret Thatcher's government allowed the City of London to compete on a much stronger platform, while also shifting away from the open-outcry trading pits.
The Big Bang of 1986 led to significant changes to the market structure, which paved the way for electronification, the acquisition of traditional banking institutions by foreign buyers and the creation of the UK regulatory body, the Financial Services Authority (now the Financial Conduct Authority).
Fast forward to today and the world is a very different, and some would say scarier, place; the London Stock Exchange is immersed in merger talks with Deutsche Börse, Brexit dominates the European landscape with its numerous worst-case-possible scenarios, and open-outcry trading is now all but extinct as electronic platforms have taken root.
In short, the events of 30 years ago created the market environments that exist today, although there are definitely some outcomes that could not have been foreseen when Thatcher made her move.
It undoubtedly paved the way for the asset management community to strengthen its position and invest in electronic trading practices, but the attitudes toward regulatory measures has gone in completely the other direction, thanks in part to that rise of electronification as new trading methods came to market.
Now we are in the position where new regulations are a regular occurrence as global authorities seek to react to, and prevent a repetition of, the 2008 meltdown—an unintended result of the deregulation that created the "too big to fail" banks. This trend isn't going to stop anytime soon; in fact, it will probably only be exacerbated by the introduction of new technologies such as distributed ledgers, which has already caused a number of regulatory-minded conversations.
Looking forward, it is hard to see what the capital markets will look like in a few years' time, let alone another 30, as Brexit could lead to a second Big Bang through the departure of large banks to mainland Europe, ruining London's status as one of the world's leading financial centers.
What is certain is that change is coming, for both the UK and international capital markets; perhaps Bob Dylan will one day write an iconic song after it. He is the Nobel Laureate for Literature after all.
Side Notes
• Speaking of the Nobel Prize for Literature, how Haruki Murakami has yet to be awarded the honor is absolutely beyond my comprehension.
• I know we are all upset about Reading FC's exit from the EFL Cup last night, but let's try and focus on Saturday's game against Nottingham Forest.
• Events! Yes, it's the time of year when we at Waters are gearing up for two of our biggest European events of the year. Next week is the Buy-Side Technology Awards 2016, closely followed by the European Trading Architecture Summit 2016 on November 17, so keep an eye out for coverage on WatersTechnology coming soon.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
DSB says industry is ready to meet UPI mandate ahead of deadline
The Unique Product Identifier will be required for certain OTC derivatives in the EU at the end of April, following US adoption in January.
‘Very careful thought’: T+1 will introduce costs, complexities for ETF traders
When the US moves to T+1 at the end of May 2024, firms trading ETFs will need to automate their workflows as much as possible to avoid "settlement misalignment" and additional costs.
Court case probes open-source licenses as movement stands at crossroads
The Software Freedom Conservancy’s lawsuit against TV-maker Vizio begins trial in California, raising questions about open-source licenses and the risks posed by adhering to them.
Waters Wavelength Podcast: Countdown to T+1
DTCC’s Val Wotton joins the podcast this week to discuss the impending move to T+1 in the US.
Consolidated tape hopefuls gear up for uncertain tender process
The bond tapes in the UK and EU are on track to be authorized in 2025. Prospective bidders for the role of provider must choose where to focus their efforts in anticipation of more regulatory clarity on the tender process.
Fighting FAIRR: Inside the bill aiming to keep AI and algos honest
The Financial Artificial Intelligence Risk Reduction Act seeks to fix a market abuse loophole by declaring that AI algorithms do not have brains.
Waters Wrap: The rise of AI washing… and regulation washing?
The SEC recently levied fines against two investment advisors over “AI washing”. Anthony takes issue with the announcement.
Prepare now for the inevitable: T+1 isn’t just a US challenge
The DTCC’s Val Wotton believes that firms around the globe should view North America’s move to T+1 as an opportunity—because it’s inevitable.
Most read
- Sell-Side Technology Awards 2024: All the winners
- Sell-Side Technology Awards 2024: Best sell-side front-office platform—Bloomberg
- Systematic tools gain favor in fixed income