Britain to unveil plans to clean up markets hit by rigging scandals

Sun Jun 7, 2015 4:32am EDT
 
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By Huw Jones and David Milliken

LONDON (Reuters) - Britain's regulators will unveil plans on Wednesday that aim to clean up behavior in the financial markets, where banks have been fined billions of pounds for trying to rig currencies and interest rate benchmarks.

The Bank of England, Treasury and the Financial Conduct Authority will publish recommendations from their Fair and Effective Markets Review into conduct and operation of currency, bond and commodity markets.

"It is going to say some quite significant things about what the scope of regulation should be for asset classes that historically have not been heavily regulated," Martin Wheatley, FCA Chief Executive and co-chair of the review, told Reuters.

The review will focus on how to raise standards of behavior among traders at banks, recommend tougher sanctions and give markets more detailed guidance on what are acceptable trading practices.

Finance industry officials expect the review to take on board some of their ideas, such as cracking down on traders known as "rolling bad apples," making it harder for a rogue trader to get a job unchallenged at another bank.

Some expect a new independent body to help with providing guidelines on market practices and enforce a new global code of conduct that central bankers are already working on.

Wheatley said, for example, there was a need to determine more clearly when legitimate hedging in markets becomes abusive "front-running," where banks use information to trade on their own account ahead of customers.

Guidance is also expected on when it is acceptable to pull out of a trade at the last minute in the currency markets, a practice known as "last look."   Continued...

 
The Canary Wharf financial district is seen in east London November 12, 2014. REUTERS/Suzanne Plunkett