On 12 June 2014, the Government announced a joint review by HM Treasury, the Bank of England, and the Financial Conduct Authority (FCA) into the way wholesale financial markets operate.
Wholesale fixed income, currency and commodity (FICC) markets underpin major financial transactions in the global economy. These markets also play a vital role in determining the costs of borrowing for households, business and government, exchange rates, and commodity prices that affect the real economy in Britain. In recent years we have seen abuse and misconduct in FICC markets, and allegations continue to circulate. The Government are determined to take action to help restore trust and integrity and to ensure that the highest standards are expected of those who operate in these FICC markets. It is important that this is done in a way that preserves the UK’s position as the global financial centre for many of these markets, with all the jobs and investment that brings.
Action has already been taken both domestically and in the EU to respond to recent market abuses by regulators, legislators and market participants. In the EU, key changes to the regulatory structure have been agreed under MiFID II and the market abuse regulation. Domestically, as well as enforcement action taken by the Financial Conduct Authority (FCA), the Government have taken steps to ensure that robust measures can be taken to tackle abuse and raise standards. This includes legislation to introduce a new criminal offence imposed on people who manipulate the LIBOR benchmark, and legislating to implement recommendations from the Parliamentary Commission on Banking Standards. The Government have also launched a consultation on extending the new legislation put in place to regulate LIBOR to cover further benchmarks in these markets, including benchmarks in the markets for gold, silver, crude oil and foreign exchange.
These are important steps, but the Government are committed to go further in ensuring that markets are fair and effective for the British economy. The Government welcome the progress that has already been made by the Fair and Effective Markets Review. The consultation document “How fair and effective are the fixed income, foreign exchange and commodities markets?” published on 27 October is comprehensive, balanced and rigorous and asks the right questions on what needs to change to address recent misconduct and reinforce fairness and effectiveness in these markets. The consultation document is available on the gov.uk website: https://www.gov.uk/government/news/fair-and-effective-markets-review-announced-by-chancellor-of-the-exchequer
The Government look forward to the review’s final recommendations in June 2015.