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Special Feature
Foul! S
Showing Market Abuse the Red Card By David Corker, Corker Binning
“It’s clear that things in these markets are not going to continue as before but the question is whether changing anything will actually change anything significant. Will the going really get tougher for the few who exploit the many?”
ince the LIBOR scandal erupted in mid-2012 there has been a wave of allegations that many other financial markets have been rigged by banks to the detriment of their customers and the public. The eye of the storm has continued to hover over alleged
systemic benchmark manipulation. Barclays was heavily fined last month in relation to manipulation of the benchmark which fixes the price of gold. In relation to the massive and unregulated FX market, the head of the FCA Martin Wheatley has warned that his organization’s investigation of traders’ activities here could uncover abuses “every bit as bad as LIBOR.”
Perhaps in reaction to pervasive disquiet about the integrity of these commodity price fixes, the London Metal Exchange just recently announced that it would preserve its open-outcry trading ring. Until recently it had planned to abolish it holding that it was an outdated regime for the
setting of metals prices. Suddenly everything has changed.
The Government has also demonstrated its conversion to the view that there is a lot wrong with financial markets. Moreover, it appears to have been decided that not to be seen to be doing something about repairing them will mean that, come next year’s election, it will be on the losing side of the argument as to whether the City is a friend or predator on the British public. The Chancellor, in particular during last May and June, unveiled a large number of initiatives all predicated on the view that its problems are serious and structural rather than a few isolated ailments.
These are the initiatives which the Treasury has announced.
1. In May, a review of the FCA’s enforcement machinery was presented as a sign of the Government’s unwavering commitment to
ensure that financial wrongdoers will be held to account. However, what is broken about the existing regime was not identified.
2. In his Mansion House speech in mid-June, Mr Osborne took this keynote opportunity to express stern words about the lack of standards in the financial industry. He then announced firstly that the bespoke criminal offence designed to criminalise tampering with LIBOR would be extended to cover similar conduct in relation to any financial benchmark. He promised a bill enabling this by the autumn. Secondly, the setting up of a Bank of England-led committee with the broadest of canvasses. To conduct a “fair and efficient markets review” with a mandate to make recommendations within twelve months. Thirdly, an extension of the criminal law to cover certain types of market abuse about which he gave scant detail.
Around the same time as Mr Osborne’s speech there was a slew of other related Government