Regulating for growth in an era of rising economic nationalism: capital market fragmentation, private capital and the public interest

In an era of rising economic nationalism, capital markets have become strategic sovereign assets. The UK and the EU are increasingly deploying regulatory policy to strengthen capital market competitiveness, support companies to scale up, and reduce dependency on foreign capital. Efforts to create more growth-oriented financing environments may also unintentionally reinforce the tendency for economically significant companies to stay privately owned and to rely on private capital. Thus, while geoeconomics are driving market fragmentation, this is happening alongside structural changes within capital markets that are blurring the traditional lines between public and private markets. 

Focusing on recent changes to UK and EU capital markets regulation, this paper explores the major challenge for capital market regulation posed by the interaction of these developments. The paper highlights the UK PISCES framework for private market stock exchanges and the EU Inc. corporate form proposal as regulatory experiments that simultaneously seek to support private market corporate finance and point to a growing urgency to think about how protection of the public interest is secured when economically significant corporate activity migrates to private markets.