British Regulators Release Fair and Effective Markets Review Final Report
The Fair and Effective Markets Review (the "Review") published its final report which sets out 21 recommendations "to help restore trust" in the wholesale Fixed Income, Currency and Commodity ("FICC") markets.
The Review was established by the Chancellor of the Exchequer and Governor of the Bank of England in June 2014 to aid FICC markets "in the wake of a number of high profile abuses."
The Review is centered on four principles: (i) individuals must be held accountable for their own conduct, (ii) firms must take greater collective responsibility for market practices, (iii) regulators should close gaps in regulatory coverage and broaden the regime, holding senior management accountable, and (iv) given the global nature of these markets, coordinated international action should be taken wherever possible to improve fairness and effectiveness.
The Review provided a number of recommendations to turn these principles into action, including:
- encouraging IOSCO to consider developing a set of common standards for trading practices that will apply across all FICC markets;
- extending UK criminal sanctions for market abuse to a wider range of FICC instruments and lengthening the maximum sentence from 7 to 10 years' imprisonment;
- creating a new FICC Market Standards Board with participation from a broad cross-section of firms and end users and, involving regular dialogue with the public authorities, to address areas of uncertainty in trading practices and promote adherence to standards;
- creating a new statutory civil and criminal market abuse regime for spot foreign exchange, drawing on the international work on a global code; and
- agreeing on a single global FX code providing a comprehensive set of principles to govern trading practices around market integrity, information handling, treatment of counterparties and standards for venue – as well as stronger mechanisms to ensure market participants adhere to that code.
The Review also identifies a set of principles to guide "a more forward-looking approach" to the structure, behavior and supervision of FICC markets, which it stated will be "an important theme" at the Open Forum to be held at the Bank of England in the fall of 2015.
See: Fair and Effective Markets Review Final Report; Bank of England Press Release. Related news: FRB Governor Powell Discusses the Fair and Effective Markets Review (with Lofchie Comment) (January 20, 2015); British Regulators Launch "Fair and Effective Markets Review" (with Lofchie Comment) (October 28, 2014).