♪ >> breathing room. the sec gives a reprieve to u.s. firms on mifid research roles. creates opportunities for exchanges. castle walls are about to come down for european banks. traditionaln lenders insuring data with tech rivals. welcome to bloomberg markets, roles and returns. nejrawreck a hitch -- i'm

cehic. mifid ii to dodd-frank, we will speak to the top newsmakers and market participants shaping and reacting to a new generation of rules. the sec says firms can accept payments from clients. a 30 month reprieve to u.s. firms on the research was coming into effect in january from mifid ii. the regulation team in washington joins us now. then, great to have you. you have been all over this story from the beginning. deciding to doc this. was it lobbying ?let's kick this --? brokeragesll street have been pushing for months to get the sec to tell them if they

can accept payment from european clients and not have to register as an investment advisor. they don't want to register in the u.s. because that carries responsibilities and costs, fiduciary duties. the sec relief they announced today is limited to european clients so they can continue to bundle research with trading execution services in the u.s. for their clients. then, youyour story, described this as a major victory for u.s. brokerages and firms. it takes away a level of uncertainty. does it give them advantage over their european peers? >> what kind of shape that appear over the last couple of weeks or months was a square off between the u.s. brokerages and their pension fund clients. pension funds in the u.s. have wanted a system like we are about to get in europe where you can pay for research with

whomever you want. at the same time you can buy trading execution services from someone else, and unbundling. by the sec stepping in today, they will essentially continue to have a situation in the u.s. where some firms will continue to bundle research and trading execution for their u.s. clients. investor advocates and pension funds aren't going to be happy in the u.s. with this but for wall street brokerages that have been pushing for this and do enjoy a lucrative business from bundling research and trading execution, they will be happy. nejra: brokerages happy. this reprieve as for 30 months. what happens after that? >> the sec will take public comment. over the next year and a half or so. it is unclear what will happen. it is possible they will come out and release a rule. it is worth noting in the u.s.,

what the sec has done here is provide guidance around a 1940 law. the law in the u.s. go back to the 30's and 40's. we have a lot of guidance and interpretations from the sec since then and what firms have is clear guidelines in terms of what they can and can't do, not of thoseing afoul rules. it is possible after 18 months or in a couple years the sec will come back and pass a new rule. nejra: thank you so much, ben. that is the latest from washington. now let's dive right into dark pools. a subject hugely impacted by the landmark mifid ii legislation. it and overhaul once -- dark pools face a major overhaul. ofd to buy large blocks

trades well keeping it hidden. that has become more important with high-frequency traders who use algorithms. hiding in dark venues it reduces the flow of information that make public stock exchanges efficient at setting prices. that is why the eu is setting limits. equity rules will force trading onto public exchanges by using measures such as caps on transactions which would by one estimate bar three quarters of european stocks from dark pools. switching to a new market, the systematic externalizer. currently account for half of dark trading in european equities. banks will be able to carry out unlimited dark trading as long as it is their own capital put at risk. while there are ways around the rules it remains to be seen where displaced trades will go.

regulators promise to keep tabs on this. equity markets are about to become more complicated. when it comes to preparing for the introduction of mifid ii the london stock exchanges leading the pack. with a guest about what the new rules will mean for his business. whether it systematic externalizers would be a problem. >> the market has a diverse range of needs. as long as there is a level playing field, we should not inhibit particular forms of trading. secondly to the reduction in a successful market. is not necessarily measured by aggregate volumes at the end of the day. but by stability at a point in time, to satisfy the liquidity needs of investors, retail

investors, larger block traders, proprietary traders, institutions, banks, sovereign funds. when divers forms of trading converge in a single entity, you get that rich texture of liquidity which ensures success of a market. ii is aou said mifid christmas of opportunity for clients? greaterlieve it can, thearound transparency, needs for institutional liquidity can be matched, the retail liquidity and we believe we offer competitive platforms. we think our customers will benefit. for manye issues institutions or traders who require the transfer of risk in large blocks, one issue out of method one, it introduced

competition. technology, liquidity was not that great, there was a feeling at the time that without competition, performance would not improve. it generated positive reaction to the market, that competition forced innovation and deep thinking about how exchanges operated. we see today in clearing with the european proposal for location policy is youou practice it -- if fragment liquidity, you can isolate pools of liquidity. that introduces the need for synchronization that would mean maintaining synchronicity of traders trading the same security. optimization, a shrinking amount of average highest transaction

on the exchanges. mifid ii gives us an opportunity to fix some of the things that were not thought through at the time of mifid 1. that introduced competition to improve exchanges but introduced fragmentation that created costs, a race. optimization in particular meant for example in the london stock exchange, the highs went from 40,000 to less than 3000. the same thing in new york. with mifid ii and the ability to , wesact large transactions also offer and we offer going that has thetform right type of algorithm and relationship with customers, the opportunity to accommodate large size of block trading. that is in need of certain constituents. nejra: those are some of the opportunities. how could mifid ii be made even

better for your business? that yout be risks have highlighted with regulators and ways it could be improved? >> when you introduce legislation as encompassing and as complex as mifid ii, that forhes a range of areas, example, clearing, it opens up a new framework that will break the old monopoly silence. it operates today on the line , prior toexchange 2007, you will see major changes in the future. putting that aside, the challenge really is the range of complexity of changes that are going to be technically put into action in the industry, that means coding, migration, new

systems. there are thousands of institutions, asset managers, brokers, exchanges, that have to redo their systems. that is the main challenge today. will the industry, and a question we got yesterday from the vice president, where you allow another extension and implementation of mifid ii? the answer was no. will the industry be ready in time for january 3, 2018? nejra: there is an idea that there may be a phasing in after january 3 on mifid ii, what will e members that are not compliant on january 3? you are allowed to bar them. would you? >> it is a thing that is not well understood, at lse we are a commercial organization. we do not have regulatory

powers. we have contracts. -- it is reciprocal. we do not have regulatory powers to determine if it is fit and proper or complying with the full range of the law. that is a matter for regulators. from what we can tell today, the level of preparation of our exchange, regards the participants, is well advanced. nejra: up next, more from our exclusive interview with the ceo of lse. this is bloomberg. ♪

♪ welcome back to bloomberg markets, rules and returns. let's get a roundup of the latest news on financial regulation. for financial win firms on capitol hill. the senate has voted to overturn a consumer financial protection bureau rule that makes it easier for consumers to sue banks. republicans have fought against the agency since it was created after the financial crisis. passporting arrangements for financial services, likely to continue during the brexit transition phase. that is according to a u.k. government looking to reassure companies. david davis says he expects toancial services firms

to keep going after 2019. a goldman sachs group is considering bolting up research coverage of small companies. are though mifid ii rules likely to shrink trading volumes and those stocks. that is according to a person who was briefed about a conference call on which the issue was discussed. a goldman sachs spokesman declined to comment. the first nordic bank to announce systematic externalizers stasis. before the mifid ii deadline comes into effect in january. they are already in cash equities but will add foreign exchange, and interest rate derivatives. that is your regulation news roundup worrie. nejra: getting back at critics that's a rules were bent to pave the way for one of the world's largest ipos. up 5% on one or two exchanges

but the u.k. investment association argues that 25% should be the minimum pre-loved level for any premium listed company in the u.k. we spoke exclusively and he said that was not the case. say therere some who is a 25% liquidity rule as far as inclusion in the premium market. i have read these comments. there isn't. a 25% governance role that mandates a minimum of 25% liquidity. there is a liquidity test and in the past there has been instances of companies which were extremely large that would provide very substantial liquidity that would allow -- that we are allowed to list on the premium market with less than 25%. this happens in the united states all the time. let's not confuse governance in the case of the 25% test, of the

threshold, and liquidity tests which is ensuring that if there is less than 25% of this on the market there is enough liquidity to ensure trading of the underlying security. nejra: what is your reaction to recent reports that they are considering a shelving of the international part of the ipo? is this to do with london becoming less attractive? xavier: that i cannot comment. i am sorry. i cannot comment on individual clients. nejra: do you think london is becoming less attractive now with brexit looming? xavier: if you look at this year's numbers, our business is up substantially. the number of ipos, and not just for u.k. companies but international companies, we now markets,s in the raised over 40 billion pounds of fortal year to date

companies not just in the u.k. but from around the world. if you look at any of the indicators in our listed markets, whether it is lse, the same applies to partners and colleagues in italy. and liquiditypos is on the increase. quite sharply. also, infrastructure debt, foreign currency, bonds, chinese u.s.ance, we have at 16 listings so far this year between the main market. it is quite the opposite. the numbers tell us liquidity is sustained. i cannot give you any more details other than that we are publishing tomorrow third quarter ims. the public data we have released shows we have been quite successful this year and helping many more companies and governments raise more capital in our markets certainly than the last couple years. second-largest

shareholder is qatar's fund. given the risk, how do you see that impacting your chances of aramco ine saudi london? in londonle is this from geopolitical risks in a general sense? xavier: i wouldn't talk suspiciously -- specifically about customers. the happy shareholder, share price, the progress of our company in the last eight years has moved amazingly to top-tier in the industry. we think decisions about capital raising, decisions about investments all lead to one thing, performance. ,f you perform for your clients

you should deliver liquidity they need, the service, the products they need. if you innovate. lse has been a fountain of innovation in the last nine years. that was the london stock exchange ceo. next, we talk the banking industry. mounting challenges and opportunities. this is bloomberg. ♪

♪ welcome back to bloomberg markets, rules and returns. i am nejra cehic in london. the future of banking. mifid ii is not the only regulation that could reshape the industry. d2, it has the ability to

break down monopolies on consumer data, people would be able to use third parties like amazon to make payments without having to be redirected. does this mean banks will no longer be competing solely against banks but anyone offering financial services? joining me now, ed, is this popular? >> not necessarily. it is a sea change. it has been building over time in the marketplace. it will not be a sudden rate. they do have to adapt to a number of new players coming out. they will no longer be able to dominate markets in the way they have. the most important element is, they will have to share their customers data with all of these and as well as, the apples and amazons and googles of the world. it is creating a new

marketplace. by law. nejra: in terms of regulation, this is different from what is happening in the u.s.. does it put european banks at a disadvantage? >> that is interesting because at first glance it would seem to be. you have regulation coming from brussels which mandates, you shall do this. you shall open up, share all your data. the u.s. has nothing of the sort. it is being shaped by the marketplace. a hodgepodge. by forcing the european banks to get with the program on digitalization, it could make them leaner and more responsive to customers. that is the ideal that the law is going for. perhaps those banks that have been dragging their feet and going into this new world, they will have to get their act together by law. nejra: will we see some banks come well out of this while others don't and we will start to see that difference in the marketplace in europe? see at experts, you will

separation between those banks that are really out in front on this, trying to provide the best mobile banking at for their customers -- mobile banking app for their customers in one place, realizing they have to do that to keep their customers. laggards, other financial institutions that don't want to do this or spend the money or form the teams, the innovation teams that have to put it together. you will see separation. nejra: does brexit matter in this? >> no. ironically, it is the u.k. that is setting the pace on what is called open making. -- has. is created created an initiative that will standardize the way banks share their data. the other countries in the eu are catching up. the u.k. has bought into this and has helped lead it.

it will not be withdrawing from psd2 as a result of brexit. nejra: banks have new competition. what does this mean for consumers? >> a lot of choice. the market could become chaotic. they will be inundated with any number of apps that help them save money, make payments, manage their current account, their investments. it is kind of crazy how chaotic the market will be. increasingly you will want apps that will gather this in one place and make sense of it for consumers. nejra: fascinating. thank you so much. that is it for this edition of bloomberg markets, rules and returns. if you have any questions, comments or feedback you can drop us in the mail at rule

sreturns@bloomberg.net. this is bloomberg. ♪

♪ >> from our studios in new york city, this is "charlie rose." charlie: we begin this evening with a focus on the opioid addiction problem. it claims over 100 lives daily. today president trump declared , it a public health emergency. in a speech alongside families affected by the opioid epidemic, the president called it the worst drug crisis in american history. pres. trump: my administration is officially declaring the opa opioid crisis a national public