Shares of Major European FX Prime Brokers on the Rise after Macron Win

The risk-on mood this morning is buoying not only French, but also European banks.

Major FX prime brokers are seeing their shares rising materially today. French banks BNP Paribas, Societe Generale and Credit Agricole are standing out and leading the charge as the Paris stock exchange’s benchmark is trading higher by over 4 percent.

The win of former investment banker Emmanuel Macron is seen by the industry as a positive development and could actually signify a slight shift from over-protectionist regulations. While Macron has not been campaigning with an agenda to deregulate the banking industry in France, should he clinch the win for the French presidency in two weeks, this could become a topic.

Macron has been working at a senior position at Rothschild & Cie Banque, a private bank belonging to Rothschild & Co. The institution was resurrected three years after being nationalized by the socialist government of Francois Mitterrand in 1981.

Industry Implications

With the prospects for financial regulation in Europe already unclear in the run-up to MiFID II, some industry insiders have already been contemplating what MiFID III might contain. Others are saying that the prospects of deregulation in the US could force the regulatory effort of European authorities to come to a halt.

Compliance costs have swelled for prime brokers in recent years and some have been cutting their foreign exchange credit lines materially in the aftermath of the SNB crisis in January 2015. The overreaction of the industry has materially impacted the profitability of some brokers, and this together with regulatory restrictions means that the face of the industry in the EU is changing.

The prospects for a more market-oriented French president are likely to lead to less pressure on further regulating the financial industry. Across the Atlantic, Treasury Secretary Steven Mnuchin and the Chief Economic Advisor of President Trump, Gary Cohn, are pushing for a reshuffling of regulations in the US. Such an effort could put material pressure on EU authorities.

In the meantime MiFID II keeps knocking on the door as industry participants are scrambling to get well prepared for the new regulatory setup in the EU.

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