Challenges for the markets around the world. We will speak to the top newsmakers, regulators, and Market Participants reacting to a new generation of rules. To the top story, the sec says firms can accept payments from clients. They gained a 30 month reprieve on the research rules coming to effect in january with mifid ii. Ben from our Financial Regulation team joins us now. You have been all over this story from the very beginning. Why did the sec decide to do this . Was it the result of lobbying from the industry . Ben large wall street brokerages have been pushing for months to get the sec to tell them they can essentially accept payment from their european clients and not have to register as an Investment Advisor. They dont want to register as an Investment Advisor in the u. S. , because it creates it creates new responsibilities and costs, essentially fiduciary responsibilities. Meanwhile, the sec relief that they announced today is limited to european clients so they can Bundle Research with Trading Execution Services for their clients. Nejra you described this as a major victory for u. S. Brokerages and firms. It takes away a level of uncertainty. Does it give them any advantage over their european peers . Ben what has shaped up was a bit of a square off between the u. S. Brokerages and their pension fund clients. Pension funds in the u. S. Have, for the longest time, wanted a system like we are about to get in europe, where you can pay for your your research with whatever you want, and buy your Trading Execution Services from someone else. Basically an unbundling. By the sec stepping in, they will essentially continue to have a situation in the u. S. Where some firms will continue to Bundle Research and trading execution for their u. S. Clients. Investor advocates and Pension Funds probably will not be very happy in the u. S. With this, but for wall street brokerages who have been pushing for this and enjoy lucrative business from bundling, they will be happy about it. Nejra brokerages are happy. This reprieve is for 30 months, ben. What about after that . Ben they will take Public Comment over the next year and a half. It is unclear what will happen. It is possible they will come out and release their rules. It is worth noting, in the u. S. , what the sec has done is provided guidance around a 1940 law. The u. S. Security laws go back to the 1930s and 1940s. We have a lot of guidance since then, and firms have clear guidelines for what they can and cant do, not risk running afoul of those rules. It is quite possible that after 18 months or a couple of years, sec could come back and say, this is a new rule. Nejra that is the latest from washington. Lets dive into dark pools, a subject that will be impacted by the landmark mifid ii legislation. Dark pools face a Major Overhaul once mifid ii regulations come into force. Traders use dark pools to buy and sell large amounts of stocks or block trades without revealing the size of their orders. This keeps the items hidden from other traders who could bet against it. That has become more important with the rise of highfrequency traders, but hiding in dark pools stops the release of information that makes the Public Markets efficient at setting prices. That is why the eu is setting limits. It will force most exchanges to use caps on transactions which would bar three quarters of european stocks from dark pools. Traders need to switch to an internalized network. Banks will be able to carry out unlimited dark trading as long as it is their own capital put at risk. While there are ways around the rules, it remains to see where these displaced trades will go. Regulators promise to keep tabs on this. The only certainty is that europes already fragmented markets are about to become much more complicated. Nejra when it comes to preparing for the introduction of mifid ii, the London Stock Exchange is leading the pack. I spoke to xavier rolet about it. I asked him about whether or not system internalizers will cause a problem for the organization. Xavier what i would say is the markets have a diverse range of needs. As long as it is a level playing field, we should not inhibit particular forms of trading, because that could lead to the production of diversity in a successful market which is not necessarily measured by aggregate volumes at the end of the day. Banks have responsibilities to satisfy the liquidity needs of investors. Retail investors, large block traders, proprietary traders, institutions, banks, sovereign funds, when diverse forms of trading converge in a single entity, you get that rich texture of liquidity that ensures the success of the market. Nejra you mentioned the fact that mifid ii is a christmas of opportunity for clients. How so . Xavier it achieves the world with greater transparency. The world needs for Institutional Liquidity can be matched with retail liquidity. We believe we offer a competitive set of platforms. We think our customers will benefit, because one of the issues for many institutions or traders who require the transfer of risk in very large blocks, one of the issues that came out of mifid i, it introduced competition in the world of exchanges. The technology was old, liquidity was not great. There was a feeling that without competition, their performance would not improve. Competition was introduced, and you generated a very positive, i think, reaction to the market, that that competition forced deep thinking about how exchanges work. It also highlighted one issue which we see today with the european proposal. If you fragment central liquidity, you can isolate pools of liquidity. That introduced the need for arbitrage activity that maintains synchronicity between many exchanges. A race toward low latency, itemization, a shrinking amount of average size transactions. Mifid ii is an opportunity to fix some of the things that were thought through with mifid i, which introduces improved forms of exchanges by introducing fragmentation that created a lot of cost, a lot of optimization, erased lower latency, but itemization in particular saw the Stock Exchange go from 40,000 to 30,000. The same thing on the new york Stock Exchange. With mifid ii, the opportunity also accommodates large size block trading which is a need of certain constituents. Nejra those are some of the opportunities, but how can mifid ii be made better for your business . There must be some risks you have highlighted and ways it can be improved. Xavier there are a number of ways it could be improved. When you introduce legislation as encompassing and complex as mifid ii in a range of areas, it opens up a new framework that will break the old monopoly silos. The futures industry today very much operates on the line with the Equity Exchange industry as it operated prior to 2007. We will see major changes in the breakup of the silos, i believe. The challenge is the range and complexity of the changes that are going to be technically put into thought and action. That means a lot of coding, migration, new systems. It means there are thousands of institutions, asset managers, brokerages, and exchanges that need to relook at their systems. That is the main challenge today. Will the industry, and the question we got yesterday, will you allow another extension of mifid ii . The answer was no. Will the industry be ready in time for january . Nejra i keep asking those questions to people as well. There is some inclination that there will be phasing after january 3. What will you do to members who are not mifid compliant . I understand you are allowed to bar them from the lse, would you . Xavier something that is not always well understood, we are a commercial organization. We do not have regulatory powers. We have contractual relationships with our customers, but we do not determine other than compliance with these contractual obligations that they have to us and we have to them. But we do not have powers to determine if they are complying with the full range of the law. That is a matter for regulators. From what we can tell today, the level of preparation of our members, who tend to regard the exchange, is well advanced. Nejra up next, more from our exclusive interview with xavier rolet. We get his thoughts on the future of the saudi aramco ipo. This is bloomberg. Nejra welcome back to Bloomberg Markets rules and returns. Ed it is a big win for Financial Firms on capitol hill. The senate has voted to overturn a Consumer FinancialProtection Bureau rule that would allow it to be easier for consumers to sue banks. Republicans have fought against the legislation since it was created after the financial crisis. Passporting arrangements. Brexit secretary david david says he expects Financial Services will continue during the brexit transition phase. Goldman sachs group is considering bulking up its coverage of small to midcap companies. Mifid ii is likely to lower Trading Volume in those two stocks. That is according to a person briefed on the Conference Call in which the issue was discussed. A spokesman refused to comment. The lender joins Deutsche Bank in making these announcements before the mifid ii deadline comes into effect in january. It will raise the internalizer in cash equities, cash bonds, and derivatives. That is your regulation news roundup. Nejra the London Stock Exchange ceo xavier rolet has hit back at critics who say that rules were bent to pave the ways for one of the Worlds Largest ipos. The u. K. Investment association argues that 25 should be the minimum free flow level for any Premium Listed Company in the u. K. He says that is simply not the case. Xavier some say there is a 25 liquidity rule as part of inclusion into the premium market. I have read some of these comments, and there isnt a 25 governance role that mandates the minimum 25 liquidity. It is a liquidity test, and, in the past, there were companies who were extremely large that would provide very substantial liquidity and were allowed to list on the premium markets with less than 25 . This happens in the United States all the time as well. Lets not confuse governance in the case of the 25 test, the 25 threshold, and a liquidity test which is ensuring that 25 is put on the market. That there is enough liquidity to ensure trading of the underlying security. Nejra what is your reaction to recent reports about the shelving of the international ipo . Xavier we couldnt comment on individual clients. Nejra do you think london is becoming less attractive with brexit looming . Xavier the number of ipos, the funds raised, and not just the number of ipos for u. K. Companies but international companies, we have raised over 40 billion pounds of capital near to date for companies not just in the u. K. If you look at any of the indicators in our listed markets by the way, the same applies to our partners and colleagues. The amounts, debt, and liquidity and the range of ipos is on the increase quite sharply. Also, there is infrastructure debt, foreign currency, bonds, chinese insurance. We have had 16 u. S. Listings so far this year. So, it is quite the opposite. The numbers tell us that liquidity is sustained. I cannot give you any more details. We will be publishing tomorrow the Third Quarter imf. The public data we have already released shows we have been quite successful this year and helping many more companies and governments raise more capital than in the last couple of years. Nejra interesting. Their second largest shareholder given the recent risk between the saudis and qatar, i wanted to ask how you see that impacting your chances of winning the saudi aramco listing in london . You said you cannot comment on saudi aramco, but how vulnerable is the listing in london from general geopolitical risk . Xavier i would not talk specifically about any potential customers. If you would allow me this humble correction, they are our number one shareholders, not the secondlargest. The progress and our company the last eight or nine years has moved convincingly to top tier. We think ultimately, it is about capital raising. It is about one thing, performance. If you perform for your clients, if you deliver the liquidity, if you deliver the service, the lsc has been a fountain of innovation in the last eight or nine years. Nejra that was London Stock Exchange ceo xavier rolet. Up next, we will talk disruptors in the banking industry. This is bloomberg. Nejra welcome back to Bloomberg Markets rules and returns. We are at bloombergs European Headquarters in london. Lets talk the future of banking. Mifid ii is not the only regulation that could shape the industry in the new year. Psd2 could have wide ranging implications. It has the ability to break down Bank Monopolies on consumer data. People will be able to use third parties like amazon to make payments without being redirected through card providers. Does this mean banks will no longer be competing against banks, but everyone offering Financial Services . Ed robinson joins me now for more. Ed, is this apocalyptic for the banks . Ed not necessarily. It is a big change for them. It is one that has been building in the marketplace over time, so it will not be a sudden break, but they will have to adapt to a number of new players coming out. They will no longer be able to dominate their markets in the same way they have. The most important element of that is they will have to share their customers data with these Companies Like the apples, amazons, and googles of the world who are moving into the payment space. It is creating an entirely new marketplace by law. Nejra in terms of regulation, this is different to what is happening in the u. S. Does it put european banks at a disadvantage to the u. S. . Ed at first glance, it would seem to be. You have regulation coming from brussels that mandates you shall do this, you shall open up and share all your data. The u. S. Has nothing of the sort. It is being shaped by the marketplace. By forcing the european banks to get with the program on digitalization, it could make them leaner, more responsive to their customers. That is the ideal the law is going for. Perhaps the banks that have been dragging their feet going into this brave new world, will have to get their act together. Nejra we will see banks come well out of it and other banks that wont. Will we really start to see that difference in the marketplace in europe . Ed most experts who are looking at the marketplace, you will see a separation of those banks that are really out in front on this, trying to provide the best mobile banking app for their customers, allowing their customers to aggregate their financial needs in one place, and realizing they have to do that to keep their customers. Then, you will have laggards. You will have other Financial Institutions that dont really want to do this, spend the money, form the innovation teams that have to put this together. You will see separation. Nejra does brexit factor into this . Ed no. Ironically enough, it is the u. K. Setting the pace on what is called generally open banking. The u. K. Has created an open Banking Initiative which will standardize the way banks share all of their data. The other countries in the eu are catching up. The u. K. Has bought into this and helped lead it. So, no, it will not be withdrawing from psd2 as a result of brexit. Nejra banks have new competition. What does this mean for consumers . Ed for consumers, it means a lot of choice. In fact, the market could become quite chaotic. They will become inundated with any number of apps that help them save money, make payments, help them manage their current account, their investments. It is crazy how chaotic the market will be. So increasingly, you will want apps that will gather this in one place and make sense of it for the consumers. Nejra fascinating. Thank you so much, ed robinson. That is it for this edition of Bloomberg Markets rules and returns. If you have questions, comments, or feedback, you can drop the team an email at rulesreturns bloomberg. Net. This is bloomberg. Announcer from our studios in new york city, this is charlie rose. Charlie two days after a vehicle attack in Lower Manhattan killed eight people and injured others, details are emerging about the history and possible motives of the suspect. Sayfullo saipov came to the United States from uzbekistan in 2010. He told authorities that he carried out the attack for isis. He had been planning the attack for up to one year. Federal authorities charged saipov with the terrorism. President trump twice tweeted that saipov should get the death penalty