One of the most profound sticking points in relation to the Brexit referendum centered around trade regulations. Although the average Briton was understandably focused with domestic affairs, there is no doubt that institutional investors were more concerned with the long-term potential ramifications of any trade hindrances. This subject has recently been addressed by some major players and as a result, it is predicted that the United Kingdom and the European Union may very well enjoy an unfettered trading relationship. How might this affect the markets in general and what impact could this have upon the world of online trading towards the latter half of 2017?
Forging New Links
International Trade Secretary Liam Fox recently made statements alluding to the fact that any potential tariffs which could be “harmful” to the people of Europe should be eliminated (1). In other words, he is espousing a flexible relationship between the United Kingdom and the European Economic Community as a whole. This may be able to forge new links in terms of the trade status with numerous countries. As a result, domestic businesses within the United Kingdom could very well be in a better position when compared to their current international status.
The Question of Regulation
Those who are against the referendum still maintain the position that regulations will be much more difficult to enforce than they were in the past. Thanks to what can be dubbed an “open-border” policy, they believe that cases of money laundering and similar offshore issues could be even more of a concern than they are at the present. There is indeed some logic to this, as organisations such as the FCA, CySEC and BaFin have already been struggling to prosecute those who wish to avoid tax obligations. This is just as true for mainland Europe as it applies to the United Kingdom.
New Online Investing Rules?
The real question here is how any modifications in existing regulations may impact the world of online trading. As the rules currently stand, many online trading portals are subject to the guidelines governing their unique jurisdictions (such as Cyprus). What will happen if the United Kingdom is deregulated in regards to access to offshore trading platforms?
The likely initial outcome is that we will witness a vast migration into the online trading community. This includes those from the EU who wish to invest in UK-based companies and vice-versa. A potential “knock-on” effect may be that the FCA and similar authorities will curtail the ways in which trades are executed. It is also likely that we will see transparency issues which must be addressed. Indeed, it has already been shown that the previous “distance selling regulations” no longer apply under the laws of the United Kingdom (2). Is it possible that we will see more stringent stipulations put in place in regards to online trading in general?
Further Access to International Markets
The most obvious advantage of any type of free trade between the UK and the EU will be that businesses can enjoy a greater range of tariff-free markets than would have been feasible in the past. Since the beginning, such a result had been one of the key points for the Brexit. It appears now that this concept could be much more of a possibility than the detractors claimed. This latitude will help the domestic economy of the United Kingdom as a whole. It is only hoped that further liquidity will trickle down to the individual household.
Liquidity: Bad or Good?
The question of liquidity will inevitable arise if we soon face a rather unrestricted trading environment. Whether or not this liquidity leads to large market swings (particularly in reference to durable goods, commodities and currencies) is yet to be seen. Risk-averse online traders could therefore choose to avoid many open-market transactions until the impact of such trade agreements is fully appreciated.
In this case, knowledge is power. Smart traders will keep ahead of any sudden swings with the help of CMC Markets and the comprehensive set of trading tools which are available. It could be a brave new world in terms of international trade. Only time will highlight what effects we may witness.