On 10 March 2010, the FSA published the Financial Risk Outlook 2010 (FRO). In the FRO the FSA outlined the main risks and issues present in its operating environment, affecting firms, markets and consumers.
The FRO was divided into 4 sections (A to D) with section C covering market risks and issues.
In Section C the FSA noted that in markets many of the trends are long term rather than crisis related, with, for instance changes occurring in equity markets due to the increased use of multilateral trading facilities, broker crossing systems, 'dark pools' and high frequency trading. But the financial crisis revealed how complex interconnections in the OTC derivatives markets had created major risks. In response, the FSA and other regulators are introducing significant reforms to increase the transparency of these markets, much greater use of central counterparties, and to ensure adequate collateralisation and capital requirements for bilateral trades. In addition the FSA's Markets Division is continuing to respond to the ongoing challenge of market abuse. The FSA believes that the problems have not changed significantly but its enforcement approach has become increasingly robust.
The FSA also published a series of Sector Digests that consider in more detail trends and risks in specific sectors: the banking sector, the insurance sector, the retail intermediaries sector and the asset management sector.
View Financial Risk Outlook 2010, 10 March 2010