London 25/06/2015 - Financial market regulation is like income tax - necessary, accepted and adhered to but in nearly all cases unloved. Tax has been around for millennia but regulation of markets such as currencies, equities, treasuries and commodities has a much smaller back-story, certainly in the UK, where legislation has waxed and waned.
What is evident, however, is that while the regulatory regime has historically moved between 'light-touch' and 'hands-on', it is currently swinging towards a much tougher and globally harmonised model, with all the challenges that will bring for banks and brokers in difficult trading conditions.
But first a recap: in the US, regulation has been very much ever-present since the 1929 Wall Street Crash, with the SEC and, for futures, the CFTC maintaining a consistent approach for most of that time. It has been different in the UK.
Prior to 1986, markets such as the Stock Exchange, the LME and the other commodity exchanges pretty much policed themselves, with the Bank of England having a very detached arms-length magisterial role - it hardly got involved until there was a crisis, such as the secondary banking sector in the 1970s and Johnson Matthey Bankers in the 1980s.
The latter, as well as the sea-change in trading ushered in by the Stock Exchange's 'Big Bang' and the proliferation of financial and currency futures products that followed, kick-started the UK regulatory regime.
In 1987, this was fairly 'laissez-faire' (and this where the acronyms come in): the SIB (Securities and Investments Board) paternally oversaw a group of SROs (self-regulatory organisations) such as the AFBD (Association of Futures Brokers and Dealers), who set the rules for firms and markets operating in their areas.
SROs did what they said on the can - and very much allowed the markets that they had oversight of, such as the LME, to get on with it.
In some ways this relaxed approach initially worked well - markets regulated themselves with appropriate rules and regulations for their particular models, keeping compliance relatively simple and manageable, and costs not too onerous.
It started to go awry with the advent of rogue traders - Nick Leeson and Yasuo Hamanaka. But while those were isolated individuals, the current century has seen more concerted and corrupt examples of group malpractice - such as LIBOR and forex manipulation.
As well, the US has taken a dim view of the events and practices surrounding the 2008 crash, with bankers and their ilk cast as the villains of the piece. And what it boils down is that politicians around the world have reached for their sledgehammers to crack nuts.
It does make sense to have a worldwide approach to oversee markets in the age of globalisation so there is nowhere to hide for potential wide-boys. But a 'one-size-fits-all' approach is not necessarily the best way to go.
In Europe, the EU never knowingly passes up a chance, where it thinks it knows best, to pass rules for its 500 million citizens. That means that there will be constant follow-ups to to current legislation, with more numbers than the sequels to films such as Terminator and Taken - don't rule out MIFID 3 and Basel 4.
For the LME and the trading community, it inevitably means more lobbying, more time expended and more expense. In current markets, where business conditions are challenging, many firms are operating on the margin. An extra dose of costs could well persude some that this is a business to be getting out of.
(Editing by Mark Shaw)