London 07/06/2016 - The main issue stemming from Britain's potential exit from the European Union (EU) is not the threat of volatility but uncertainty about regulations, LME CEO Garry Jones said.
"People talk about the volatility in the markets and how we would cope. But you know what? We will cope pretty well with volatility. We have robust technology and a robust clearing house - that to me is not an issue," he told delegates during the IDX conference here today.
"It's more the practical aspects... will we still be bound to regulations?" he added.
The UK will vote in a hotly contested referendum on June 23 whether Britain should leave or remain in the EU. One of the key arguments from the leave campaign is that Britain is too tightly constrained by tough regulations agreed in Brussels - an exit would loosen the ties.
"Were the UK to leave, are they still bound by MIFid II and European regulations? What role does EMIR play and all the other entities there are?” Jones said, adding that regardless of the outcome it would be at least two years before there were any big changes.
"So of course a European exchange would have a plan B and would be talking to its regulators as things happen," he said.
As well, not all the current regulations would necessarily remain in play should the UK vote to leave.
"Given that the UK regulators have been involved in the formation of those rules, then they can pick and choose a little bit. I think they will frankly adopt policies that are perhaps more relevant to a UK business as opposed to all of the Europeans. Quite often when you get a consensus in Europe, the consensus isn't always the best thing," he added.
As well as the regulation issue, there remain questions about whether clients would remain in London or relocate, Jones sais. Many firms also hire a large number of European staff - it is not clear if a "leave" vote would require European staff to have visas.
The LME has been working on its own impact assessment for the exchange and its clearing house.
"The potential Brexit is an issue no organisation can ignore… [the LME is] addressing the short-, medium- and long-term implications for both potential outcomes of the UK referendum," a LME representative said in April. "We are confident that our existing systems and processes are robust, and will ensure the continuance of a fair and orderly market, regardless of the result."
(Editing by Mark Shaw)