British authorities are undertaking a review of wholesale financial markets, and pledging several reforms in the wake of the latest market manipulation scandals.
The UK Treasury said Thursday that it will carry out a joint review, along with the Bank of England and the Financial Conduct Authority (FCA), into the way wholesale markets operate. The government says that the review will focus on areas of the market where recent misconduct has been revealed — fixed income, foreign exchange, and commodity markets — and that it aims to reinforce confidence in the fairness and effectiveness of these markets, and to influence the international debate on trading practices.
The review, which is expected to take 12 months, will make recommendations on: principles to govern the operation of fair and effective financial markets; reforms to ensure standards of conduct adhere to those principles; tools to strengthen the oversight of market conduct; defining the regulatory perimeter for wholesale financial markets; and, the extent to which international action is required.
In the meantime, the government says that it will also be extending new legislation created to regulate LIBOR to cover further benchmarks in the foreign exchange, fixed income and commodity markets, including the adoption of new criminal sanctions for market manipulation. It will also expand its senior managers and certification regime to cover all banks, including foreign banks with branches in the UK. And, the government says that it will not adopt European Union rules on market abuse, instead promising its own rules that “will be as strong or stronger than those of the EU, but will preserve flexibility”. Consultations on these measures will take place later this year.
“The integrity of the City matters to the economy of Britain,” said Chancellor of the Exchequer, George Osborne. “I am going to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them.”
Mark Carney, governor of the Bank of England, welcomed the review, saying, “Through it, we will build true markets. Markets that are open and transparent, where access extends beyond a privileged few, and where all who wish to trade have common information and commonly accessible prices.”
“Confidence and trust are critical to financial markets – and robust, reliable benchmarks are the bedrock of market integrity. I welcome this review, which will ensure that key markets operate with the highest standards of integrity,” added Martin Wheatley, chief executive of the FCA.
A panel of market practitioners will also be appointed to ensure the views of the financial services industry are reflected in the review. This panel will be chaired by Elizabeth Corley, CEO of Allianz Global Investors.