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MAR, Mifid, REMIT

Fines galore in the financial markets

Yesterday the UK’s Financial Conduct Authority (FCA) announced that Barclays had been given a record fine for FX Benchmark manipulation, of £284,432,000. The comprehensive press release, together with an informative presentation, can be found here. The CFTC have also fined Barclays and others for manipulation of interest rate related instruments. That press release can be found here.

With the REMIT manipulation rules already in force, and MAR being extended to many other parts of the commodity trading industry, we are likely to see more scrutiny of the markets, and perhaps fines as well. In fact REMIT investigations have started, as we saw recently.

Commodities and energy trading is not held to be as “systemic” as the banking industry as a whole, which is likely to mean that any fines levied will not reach these high levels. Never the less, there is an increased emphasis on stamping out abuse in “markets” and this will continue. In the eyes of many outside the industry, the business of “trading” is ripe for more regulation, partly because of perceived abuse. We can expect this perception to drive the application of other regulations such as MiFID II, as they get finalised.

Market participants will need to consider how to ensure that they do not fall foul of such fines. The fines are not only damaging financially, but also in terms of reputation. As has been previously discussed, it is possible to spend a lot of time and money on surveillance processes and technology , in order to attempt to reduce the risk of such activity taking place. Clearly, given this and other news, there is merit in increased attention to this area. In the end Market Participants will need to decide how to deal with the risk of abuse internally, and act pragmatically and sensibly when setting budgets for their own surveillance programme.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.

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