A desire to restore trust in the wholesale fixed income, currency and commodity (FICC) markets underpins a string of 21 recommendations published by the Fair and Effective Markets Review (FEMR).
The review, which was chaired by Minouche Shafik, deputy governor for markets and banking at the Bank of England, was established in June 2014 by chancellor George Osborne and Mark Carney, governor of the Bank of England. Its aim was to help to restore trust in those markets in the wake of a number of recent high-profile abuses.
In its final report, the review set out its recommendations, which are intended to restore trust and fairness in FICC markets, while also boosting their overall effectiveness. The ACT contributed to the review process and is quoted in the report.
The review is centred on four principles. First, individuals must be held to account for their own conduct. Second, firms must take greater collective responsibility for market practices. Third, regulators should close gaps in regulatory coverage and broaden the regime, holding senior management to account. And fourth, given the global nature of these markets, coordinated international action should be taken wherever possible to improve fairness and effectiveness.
Among the recommendations for individuals are encouraging the International Organization of Securities Commissions to develop a set of common standards for trading practices that will apply across all FICC markets, and mandating qualification standards to improve professionalism and disclosure requirements for references to avoid misconduct going undetected when individuals change jobs.
Among the recommendations for firms is creating a new FICC Market Standards Board with participation from a broad cross-section of firms and end users. The ACT has said that it is committed to supporting this board.
Furthermore, it is proposed that a new statutory civil and criminal market abuse regime should be established for spot FX.
Commenting on the review, Marshall Bailey, president, ACI Financial Markets Association, said: “From our perspective, the most important takeaway from this is that the FEMR will lead to an increased emphasis on financial education on ethics and industry-wide training as well as the adoption of a single code of conduct for FX to raise standards and accountability. Regulators are rightly stepping up efforts to tackle trader misbehaviour and place conduct at the heart of their reforms.”
Meanwhile, the British Bankers’ Association’s chief executive, Anthony Browne, observed:
“It’s vital that London once again sets the gold standard for fair dealing and integrity in financial markets. We welcome the intention to extend regulation from banks to other types of trading organisations. This should give customers greater clarity and protection.”