The Financial Services Authority (FSA) published “Growth in Commodity Investment: Risks and Challenges for Commodity Market Participants” on March 26. This paper examines the recent increases of investment in and new products on UK commodity markets.

The FSA is reviewing possible risks that these may pose to maintaining confidence in the UK financial system including: (i) systems and controls on exchanges dealing with the increased volume of trades; (ii) risk management; (iii) challenges posed by high volume trading and new trading techniques; and (iv) unsuitability of investments for retail investors. The FSA has announced that it will increase its monitoring of UK commodities markets and FSA regulated firms and exchanges are advised to put in place appropriate measures to detect and prevent improper practices.