The UK Treasury, the Bank of England and the UK Financial Conduct Authority have jointly launched a Fair and Effective Markets Review (FEMR) of the fixed income, foreign exchange and commodities (FICC) markets in the UK. According to the UK regulators, the FEMR consultation is motivated by a need to ensure that the FICC markets in the UK are “fair and effective” and that confidence is restored in these markets following recent allegations of wrongdoing. The consultation document notes that, although the FICC markets are characterized by sophisticated participants, events in these markets have consequences for the wider economy and therefore whether the markets are “fair and effective” must be assessed in light of these broader economic interests.
For these purposes, the UK regulators propose to define an “effective” FICC market as one that enables market participants to trade at competitive prices while allowing the ultimate end-users to undertake investment, funding, risk transfer and other transactions in a predictable fashion, underpinned by robust infrastructure. A FICC market will be “fair” to the extent that it has clear and consistently applied standards of market practice, demonstrates sufficient transparency and open access, allows market participants to compete on the basis of merit, and provides confidence that participants will behave with integrity. With these proposed definitions in mind, responders have been asked in the FEMR consultation to identify where FICC markets may currently not be “fair” or “efficient” and to propose additional steps that may be required to help remedy these deficiencies. Responders have also been urged to identify existing regulatory, technical or organizational developments that have, or are likely to have, addressed deficiencies in order to minimize duplication of efforts.
The FEMR consultation document is available here. The consultation period closes on January 30, 2015.