The Financial Services Authority (FSA), the UK’s financial market regulator, on Tuesday signalled a fresh clampdown on market abuse when it said it suspected some commodity brokers were sharing information about trades.
The city regulator warned it had received “general concerns” that some brokers could be giving information about client positions and plans to other, preferred customers – a practice that could constitute market abuse.
It appealed for the industry to tighten its controls and to pass on suspicions to the regulator.
“Those acting in a broking capacity …should not disclose precise information such as the exact position of stop losses and details of other clients’ overall positions,” the regulator said in its first newsletter dedicated to commodity markets.
The concerns are likely to be based on little more than hearsay. The FSA would need more concrete information to properly investigate the issue.
The FSA’s warning marked a stepping up of its efforts to oversee the commodities sector, which is less closely regulated than markets with retail customers, such as equities.
The UK watchdog has faced stinging criticism from US officials and politicians concerned that less rigorous oversight in London might have allowed price-boosting speculation in oil markets.
Last week US federal regulators made fresh steps to curb speculation in the commodity markets under growing pressure from Washington lawmakers.
London is also competing with New York to be the world’s leading commodities hub. The UK has recently scored points with some Wall Street banks, including Citigroup, moving their top commodities bankers to London.
On Tuesday, the FSA said it was surprised not to have received more reports of suspicious transactions regarding commodity markets.
Since dealers and others were required in July 2005 to submit reports about suspicious trading in all asset classes, only a “handful” of the 700 received relate to commodities. “Firms may be applying too high a test for what is suspicious,” the regulator said.
