1 00:00:03,480 --> 00:00:07,560 Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 2 00:00:07,640 --> 00:00:10,440 Speaker 1: day we bring you insight and analysis into the most 3 00:00:10,480 --> 00:00:13,440 Speaker 1: important legal news of the day. You can find more 4 00:00:13,480 --> 00:00:18,040 Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud 5 00:00:18,320 --> 00:00:22,760 Speaker 1: and on Bloomberg dot com slash podcasts. After seven years 6 00:00:22,760 --> 00:00:26,279 Speaker 1: of preparation, two billion dollars in compliance costs, and one 7 00:00:26,360 --> 00:00:30,720 Speaker 1: false start, the finance industry brace for a seismic regulatory 8 00:00:30,800 --> 00:00:34,960 Speaker 1: shift today, affecting everything from research to dark pools. It's 9 00:00:35,000 --> 00:00:39,360 Speaker 1: all about the obscure acronym method two the second iteration 10 00:00:39,400 --> 00:00:43,480 Speaker 1: of the Markets in Financial Instruments Directive, a European law 11 00:00:43,479 --> 00:00:47,199 Speaker 1: that's close to seven thousand pages long. Joining me is 12 00:00:47,320 --> 00:00:51,000 Speaker 1: Luca Enrique, corporate law professor at the University of Oxford 13 00:00:51,080 --> 00:00:55,120 Speaker 1: Law School. Luca, the biggest regulatory change in Europe in 14 00:00:55,200 --> 00:00:57,920 Speaker 1: more than ten years. Has it gotten off to a 15 00:00:58,000 --> 00:01:02,280 Speaker 1: smooth start or are there any problem? Well, so it 16 00:01:02,360 --> 00:01:07,560 Speaker 1: appears from today's reports, and the industry was preparing for 17 00:01:07,959 --> 00:01:11,280 Speaker 1: a long time. There have been some reprieves by the 18 00:01:11,760 --> 00:01:17,039 Speaker 1: European authorities, so so far, so good. Now will this 19 00:01:17,200 --> 00:01:21,280 Speaker 1: really make stock markets more transparent or will the industry 20 00:01:21,360 --> 00:01:26,759 Speaker 1: keep trading on dark pools. We'll hard to predict, but 21 00:01:27,080 --> 00:01:34,600 Speaker 1: there is evidence that market players have come up with 22 00:01:34,720 --> 00:01:39,520 Speaker 1: the new products that will find ways around the attempts 23 00:01:39,520 --> 00:01:47,840 Speaker 1: to make lead markets more prominent in today's fragmented you 24 00:01:48,000 --> 00:01:55,000 Speaker 1: trading venues market, So fund managers will not have to 25 00:01:55,040 --> 00:01:57,800 Speaker 1: pay for the research they use in an attempt to 26 00:01:57,840 --> 00:02:02,840 Speaker 1: avoid conflicts of interest. What effect will that unbundling have 27 00:02:03,440 --> 00:02:06,760 Speaker 1: on pricing for analysis? Some people say they see in 28 00:02:06,800 --> 00:02:12,079 Speaker 1: effect already. Well, yes, the big risk is that there 29 00:02:12,120 --> 00:02:18,480 Speaker 1: will be less financial rese equity research around, especially for 30 00:02:19,480 --> 00:02:24,680 Speaker 1: smaller companies which already are subject to a number of 31 00:02:25,480 --> 00:02:30,560 Speaker 1: regulatory majors that have increased the cost of being listed. 32 00:02:31,320 --> 00:02:37,520 Speaker 1: And more generally, the smaller players in the market for 33 00:02:38,320 --> 00:02:45,440 Speaker 1: research may find a harder time to sell their their products. 34 00:02:45,520 --> 00:02:48,680 Speaker 1: So the first week of the year tends to be 35 00:02:49,160 --> 00:02:54,040 Speaker 1: quiet anyway. But will trading volumes be lower than usual 36 00:02:54,240 --> 00:02:59,320 Speaker 1: across Europe in the short term? Oh? That that's very 37 00:02:59,320 --> 00:03:04,320 Speaker 1: difficult to There are so many factors there. I don't 38 00:03:04,680 --> 00:03:10,480 Speaker 1: think that we will see that, but but what only 39 00:03:10,480 --> 00:03:14,919 Speaker 1: time will tell um Now, I understand that at least 40 00:03:15,000 --> 00:03:18,639 Speaker 1: nine of the twenty eight European Union members have yet 41 00:03:18,680 --> 00:03:24,399 Speaker 1: to convert the rules into national legislation or regulations. Will 42 00:03:24,520 --> 00:03:31,000 Speaker 1: that failure affect the implementation of method too? I don't 43 00:03:31,000 --> 00:03:35,880 Speaker 1: think so, because it's relatively frequent for members states not 44 00:03:36,120 --> 00:03:40,240 Speaker 1: to be in line with legislation when the dead light comes, 45 00:03:40,240 --> 00:03:45,960 Speaker 1: and there are ways for European institutions and also for 46 00:03:46,120 --> 00:03:48,680 Speaker 1: members state to deal with that. Of course, there will 47 00:03:48,720 --> 00:03:54,120 Speaker 1: be some more uncertainty, more more work for for for 48 00:03:54,280 --> 00:03:59,000 Speaker 1: lawyers and love fers, but overall we have gone through 49 00:03:59,240 --> 00:04:03,000 Speaker 1: these sort of issues before in relevant areas, such as, 50 00:04:03,040 --> 00:04:07,920 Speaker 1: for example, the market Abuse Directive with no big disruptions. 51 00:04:07,960 --> 00:04:11,240 Speaker 1: I would say, so, how long will it take that 52 00:04:11,400 --> 00:04:14,800 Speaker 1: sort of refining that you're talking about, How long will 53 00:04:14,800 --> 00:04:20,440 Speaker 1: that take before it becomes normalized? Oh? I think that 54 00:04:20,520 --> 00:04:25,000 Speaker 1: the there will not be a time when all will 55 00:04:25,040 --> 00:04:28,520 Speaker 1: be settled, because as soon as everything will be sorted out, 56 00:04:29,240 --> 00:04:34,400 Speaker 1: European policymakers will find that there are things that have 57 00:04:34,520 --> 00:04:37,839 Speaker 1: to be improved, adaptation that have to be made in 58 00:04:37,920 --> 00:04:41,000 Speaker 1: response of market reactions and so on. So this is 59 00:04:41,000 --> 00:04:45,120 Speaker 1: an area where it will always be the case that 60 00:04:45,200 --> 00:04:49,920 Speaker 1: there will be new rules, new interpretations and so on. 61 00:04:51,160 --> 00:04:55,160 Speaker 1: So what do you see as the biggest benefit of 62 00:04:55,160 --> 00:05:00,400 Speaker 1: this is this worth all that the company is any 63 00:05:00,480 --> 00:05:06,800 Speaker 1: industry have gone through in the last years. I'm quite 64 00:05:07,600 --> 00:05:11,520 Speaker 1: skeptical about the overall benefits of such a big piece 65 00:05:11,560 --> 00:05:17,680 Speaker 1: of legislations, if only because under underlying it is the 66 00:05:17,760 --> 00:05:23,480 Speaker 1: idea that policy makers can design markets and markets as 67 00:05:23,560 --> 00:05:28,800 Speaker 1: as complicated and as global as equity and securities markets. 68 00:05:29,560 --> 00:05:36,440 Speaker 1: So there is a high chance that whatever they planned, 69 00:05:36,600 --> 00:05:40,919 Speaker 1: we will not turn out as they wished. At the 70 00:05:40,960 --> 00:05:43,719 Speaker 1: same time, but we said that on on a number 71 00:05:43,760 --> 00:05:48,240 Speaker 1: of issues that are less prominent in in the commentaries 72 00:05:48,320 --> 00:05:50,840 Speaker 1: this day, there will be there might be an improvement 73 00:05:50,920 --> 00:05:54,120 Speaker 1: in investor protection because there are a number of major 74 00:05:54,240 --> 00:05:58,719 Speaker 1: staffs that are meant to tackle issues like the one 75 00:05:59,360 --> 00:06:05,280 Speaker 1: Italy with the retail investors who both subordinated depth of 76 00:06:05,440 --> 00:06:09,640 Speaker 1: banks at them when vast I think that's an area 77 00:06:09,680 --> 00:06:13,600 Speaker 1: which is underappreciated at the moment but may bring some benefits. 78 00:06:14,839 --> 00:06:20,200 Speaker 1: Will this legislation cause some companies dissuade them from becoming 79 00:06:20,320 --> 00:06:27,559 Speaker 1: publicly traded companies? It is possible that it that that 80 00:06:28,080 --> 00:06:30,800 Speaker 1: may happen, especially as they said, because it will be 81 00:06:30,839 --> 00:06:38,320 Speaker 1: even harder to find um anyone to follow smaller issues 82 00:06:38,760 --> 00:06:42,919 Speaker 1: in terms of providing research for them, because fewer people 83 00:06:42,960 --> 00:06:49,479 Speaker 1: will will will pay for that, although indirectly and therefore 84 00:06:50,040 --> 00:06:53,640 Speaker 1: there is a serious issue with regard to small medium 85 00:06:53,720 --> 00:06:59,680 Speaker 1: size issues in Europe now and as far as the 86 00:06:59,720 --> 00:07:03,440 Speaker 1: serve valence of what's going on, will regulators be able 87 00:07:03,480 --> 00:07:11,400 Speaker 1: to spot risky situations earlier? Because of myth it too well? 88 00:07:11,480 --> 00:07:13,880 Speaker 1: For sure, the tours are there in the sense that 89 00:07:15,520 --> 00:07:21,280 Speaker 1: loads of information will have to be provided to regulators 90 00:07:22,360 --> 00:07:27,360 Speaker 1: about trading and in other areas as well. Whether regulators 91 00:07:27,400 --> 00:07:31,880 Speaker 1: are up to the task and we'll manage to see 92 00:07:31,880 --> 00:07:38,600 Speaker 1: through all the information and and and timely proactively do 93 00:07:38,800 --> 00:07:42,800 Speaker 1: something about it is another story. Judging from the past 94 00:07:42,880 --> 00:07:47,160 Speaker 1: that there's not much reason to be optimistic. But but 95 00:07:47,360 --> 00:07:50,600 Speaker 1: who knows. Well it sounds like you think those two 96 00:07:50,640 --> 00:07:53,760 Speaker 1: billion dollars in compliance costs are two billion too much. 97 00:07:54,000 --> 00:07:56,880 Speaker 1: Thank you for being here. That's Luka and Rique. He's 98 00:07:56,880 --> 00:08:00,360 Speaker 1: a corporate law professor at the University of Oxford Laws School. 99 00:08:05,520 --> 00:08:08,200 Speaker 1: President Donald Trump has bragged about the record pace of 100 00:08:08,280 --> 00:08:11,080 Speaker 1: his appointments of federal judges to the bench, but that 101 00:08:11,160 --> 00:08:13,680 Speaker 1: won't be enough to push the judiciary to the right. 102 00:08:13,920 --> 00:08:18,160 Speaker 1: The obstacle appointments made by his predecessor, Barack Obama. Joining 103 00:08:18,200 --> 00:08:21,000 Speaker 1: me from our Bloomberg nine sixties studio in San Francisco 104 00:08:21,040 --> 00:08:23,720 Speaker 1: is Bloomberg News legal reporter Carter came a road trup. 105 00:08:24,120 --> 00:08:26,760 Speaker 1: Carter ca there are twelve federal circuit Court of Appeals 106 00:08:26,760 --> 00:08:29,560 Speaker 1: in the country, which are one step below the Supreme Court. 107 00:08:29,960 --> 00:08:34,000 Speaker 1: How many courts had democratic majorities when Obama took office 108 00:08:34,080 --> 00:08:36,720 Speaker 1: in two thousand nine and how many when he left 109 00:08:36,760 --> 00:08:42,560 Speaker 1: office he's got There were um fewer than eight. Right now, 110 00:08:42,600 --> 00:08:46,720 Speaker 1: the majority for Democratic appointed judges is eight to four 111 00:08:47,360 --> 00:08:51,320 Speaker 1: UH and and the president has fifteen vacancies at his 112 00:08:51,400 --> 00:08:56,960 Speaker 1: disposal to to try to bolster to UH, to create 113 00:08:57,160 --> 00:09:00,840 Speaker 1: a larger UH, to shorten the apps sorry for for 114 00:09:00,960 --> 00:09:05,280 Speaker 1: Republican appointees UH. And those currently are not enough to 115 00:09:05,480 --> 00:09:09,320 Speaker 1: really chip into the majority that President Obama was able 116 00:09:09,360 --> 00:09:12,719 Speaker 1: to build over his eight years. People make question how 117 00:09:12,800 --> 00:09:16,600 Speaker 1: much of a difference the majority on Court of Appeals 118 00:09:16,640 --> 00:09:20,319 Speaker 1: makes when cases are normally heard by a three judge panel. 119 00:09:20,720 --> 00:09:23,240 Speaker 1: But we've talked a lot on this show about on 120 00:09:23,480 --> 00:09:27,040 Speaker 1: bank panels. Tell us about those and what happens in 121 00:09:27,080 --> 00:09:30,520 Speaker 1: those cases, So it's true, Um, if there's a three 122 00:09:30,600 --> 00:09:34,480 Speaker 1: judge panel, UH, the political leaning of of the court 123 00:09:34,520 --> 00:09:39,400 Speaker 1: may not necessarily be a crucial But when that ruling 124 00:09:39,480 --> 00:09:42,280 Speaker 1: from the from the three judge panel is reviewed by 125 00:09:42,280 --> 00:09:46,080 Speaker 1: the on bank panel, which could be the entire uh 126 00:09:46,320 --> 00:09:49,720 Speaker 1: see of of active judges, then then you have a 127 00:09:49,760 --> 00:09:54,439 Speaker 1: majority of Democrats or Republicans appointed judges in that court 128 00:09:54,520 --> 00:09:58,880 Speaker 1: making a decision when politics could in fact come into play. 129 00:09:59,200 --> 00:10:02,480 Speaker 1: Twenty two of the Federal Appeals Court judges are older 130 00:10:02,480 --> 00:10:06,760 Speaker 1: than seventy five? Could retirements give Trump enough to change 131 00:10:06,760 --> 00:10:10,480 Speaker 1: the balance of power on those courts? Absolutely? Um With 132 00:10:10,520 --> 00:10:13,679 Speaker 1: those fifteen vacancies now, he can't do much. But over 133 00:10:13,720 --> 00:10:17,520 Speaker 1: the next few years, UH, if there are judges who 134 00:10:17,600 --> 00:10:22,559 Speaker 1: do retire or who die, UH, increase vacancies could create 135 00:10:22,559 --> 00:10:25,240 Speaker 1: that opportunity. What we're hearing though, is that many of 136 00:10:25,240 --> 00:10:28,160 Speaker 1: those judges who are getting up in age may not 137 00:10:28,320 --> 00:10:31,080 Speaker 1: want to retire for this very reason. They want to 138 00:10:31,120 --> 00:10:35,720 Speaker 1: avoid creating vacancies that would allow the president to politicize 139 00:10:35,720 --> 00:10:40,160 Speaker 1: the courts and create uh an opportunity for Republican appointed 140 00:10:40,240 --> 00:10:43,920 Speaker 1: judges to grasp control of these crucial courts. Should note 141 00:10:43,920 --> 00:10:47,680 Speaker 1: that judicial philosophies and political leanings of judges don't always 142 00:10:47,679 --> 00:10:50,360 Speaker 1: align with the party of the presidents who appoint them. 143 00:10:50,360 --> 00:10:53,040 Speaker 1: There are plenty of cases to illustrate that, even on 144 00:10:53,080 --> 00:10:56,480 Speaker 1: the Supreme Court. Tell me about the Seventh Circuit and 145 00:10:56,600 --> 00:11:06,040 Speaker 1: its decision in April car Deca, Cardc, Are you there 146 00:11:08,400 --> 00:11:10,640 Speaker 1: all right? We seem to have lost car Decay. But 147 00:11:10,760 --> 00:11:14,120 Speaker 1: the Seventh Circuit in uh is it in Illinois, and 148 00:11:14,200 --> 00:11:18,480 Speaker 1: it is a Republican dominated circuit, and yet in April 149 00:11:18,720 --> 00:11:22,240 Speaker 1: it was one of the first courts to actually make 150 00:11:22,400 --> 00:11:26,240 Speaker 1: a very bold decision. There you are, Cardca, I'm glad 151 00:11:26,240 --> 00:11:29,520 Speaker 1: you're back to explain the Seventh Circuit's decision in April. 152 00:11:31,760 --> 00:11:35,600 Speaker 1: Car Deca so in in April, indeed, the Republican heavy 153 00:11:35,640 --> 00:11:41,240 Speaker 1: circuit in Chicago voted eight three on bonk to rule 154 00:11:41,559 --> 00:11:45,880 Speaker 1: that the N four Civil Rights Act that prohibits discrimination 155 00:11:46,120 --> 00:11:48,199 Speaker 1: was based on sexual orientation. It was. It was a 156 00:11:48,280 --> 00:11:56,960 Speaker 1: landmark decision and ultimately has reshaped the could reshape the 157 00:11:57,120 --> 00:12:02,000 Speaker 1: direction of of that court. And in about thirty seconds, 158 00:12:02,480 --> 00:12:05,680 Speaker 1: Trump's appointees will have an impact on the three judge 159 00:12:05,720 --> 00:12:08,760 Speaker 1: panels and in the trial courts, And isn't is that 160 00:12:08,800 --> 00:12:12,640 Speaker 1: where the vast majority of cases are decided, and that's right, 161 00:12:12,760 --> 00:12:17,720 Speaker 1: and and their democratic sorry Republican appointed judges are on 162 00:12:17,800 --> 00:12:22,200 Speaker 1: pace to to take the lead. Um, so the majority 163 00:12:22,200 --> 00:12:25,560 Speaker 1: of federal court cases are going to be determined there. 164 00:12:25,800 --> 00:12:29,040 Speaker 1: It's those crucial cases which is sometimes five to ten, 165 00:12:29,840 --> 00:12:33,559 Speaker 1: but those landmarks that are appealed to the circuit courts 166 00:12:33,679 --> 00:12:39,040 Speaker 1: where where the question of the president's ability to reshape 167 00:12:39,200 --> 00:12:41,800 Speaker 1: is up in the air, well, certainly a topic that 168 00:12:41,800 --> 00:12:44,400 Speaker 1: we are going to be keeping our eye on and counting. 169 00:12:45,160 --> 00:12:48,480 Speaker 1: Thank you so much. That's Carter ka Mirotra Bloomberg new 170 00:12:48,520 --> 00:12:50,280 Speaker 1: his legal report of coming to us from the Bloomberg 171 00:12:50,400 --> 00:12:53,520 Speaker 1: nine sixties studio in San Francisco. Thanks for listening to 172 00:12:53,520 --> 00:12:56,840 Speaker 1: the Bloomberg Law Podcast. You can subscribe and listen to 173 00:12:56,880 --> 00:13:00,600 Speaker 1: the show on Apple Podcasts, SoundCloud, and on Blueberg dot 174 00:13:00,640 --> 00:13:11,000 Speaker 1: com slash podcast. I'm June Rosso. This is Bloomberg m HM.