More than half of European traders see increased regulation as their biggest barrier over the next year, according to research from the SIX Swiss Exchange.
Of the 135 equity, bond and other traders surveyed in the UK and Europe, 55 per cent ranked regulation as the most challenging hurdle compared to eight per cent who thought Brexit topped the list.
Of particular concern was the revised Markets in Financial Instruments Directive (Mifid II), a piece of EU legislation due to take effect from January 2018, which sets out a framework for the trading of financial instruments.
“We can see that macro issues, such as the Chinese economy and Brexit, are of little to no concern. Yet things that directly impact the world of traders, such as regulations like Mifid II and the European job market, are the chief concern,” said Tony Shaw, director of the Swiss stock exchange's London office.
A substantial 52 per cent of traders expressed concern that their firm would shrink its workforce, although the jobs market was more of a priority for European traders compared to their London counterparts who were preoccupied with Brexit.
Just five per cent raised the global influence of the Chinese economy as an impediment, while nine per cent cited increased competition.
One change which Mifid II will introduce is the “double volume cap”, which will limit the use of transparency waivers and therefore restrict “dark pool” trading – where private exchanges not accessible to the investing public are used for trading securities.
Opinion seems divided on whether this will increase the number of block trades, hoping to benefit from the large-in-scale transparency waiver.
While 17 per cent of respondents said they were trading more actively and with increased interaction with block sized liquidity, 35 per cent were undecided on whether the changes would push them to trade in larger block sizes.
Despite the uncertainty, traders were generally bullish about their market over the next five years with the majority – 43 per cent – estimating it would remain stable. A slightly smaller 30 per cent stated it would grow by less than 50 per cent, while an optimistic 18 per cent were convinced it would grow by more.
However, a pessimistic nine per cent predicted the space would decline over the next half-decade.