SMALLER firms risk being sent to the wall as the EU massively increases financial red tape, a top trader has warned.
With reams of regulation getting rolled out year-on-year the notion of ‘too big to fail’ has been replaced with ‘too small to comply’ as fledgling firms struggle to keep up.
PA:Press Association A huge increase in red tape could spell disaster for smaller firms in the EU
The dire assessment follows the implementation earlier this year of the EU’s regulatory reforms known as MiFID II which contains over 1.4million paragraphs of rules.
Daniel Schlaepfer, CEO of day trading firm Select Vantage Inc, which trades upwards of $3billion daily, says the regulation has left medium and smaller sized firms struggling to cope with the costs associated with complying.
He said: “Financial regulation should be designed to make markets more efficient. Imperfect competition created as a result of heavy-handed regulation decreases market efficiency.
“This is the case with the recent MiFID II regulation in the EU. Small and medium sized firms are disadvantaged because they can’t compete when the costs of complying with regulation are so high.
PA:Press Association A top trader said the financial regulation has decreased market efficiency
“We are repeating the mistakes of the past by creating firms that are ‘too-big-to-fail’ through this massive consolidation.”
There has been over 50,000 regulatory updates introduced in 2015 – double that of 2012.
Banks spent over $100 billion on regulatory compliance in 2016, and according to Schlaepfer, that figure is only set to rise.
He said: “We need to rationalize how we do regulation at a global level.
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