The FCA has published a speech given by its CEO, Andrew Bailey. The speech is entitled Recent developments in financial markets.
The speech begins with an overview of the state of financial markets in the UK. Amongst other things Mr Bailey touches on two important pieces of work the FCA is involved in. First, the FCA has been looking hard at the risks from open-ended fund structures. Second, algorithmic trading where Mr Bailey explains that the regulator’s intent is not to stand in the way of the use of algos, but rather to ensure that firms have robust governance, risk management and compliance standards. Mr Bailey adds that used well, algos are an obvious innovation in trading, but used badly they can cause wider risks to the system.
Mr Bailey then discusses MiFID II, stating that the FCA was very clear that its highest priority was that the introduction of MiFID II did not lead to market disruption. Mr Bailey confirms that despite some inevitable roughness around the edges, MIFID II preparations paid off with no major operational disruptions to trading and evidence that the changes have not adversely affected liquidity across equities, bonds and derivatives.
Mr Bailey notes that prior to implementation the FCA said that its approach to enforcement of the new MiFID II rules would be consistent with its general effective and proportionate approach to the use of enforcement powers. However, Mr Bailey explains that it was not the FCA’s intention to offer forbearance, it would expect firms to comply with their obligations. But rather the regulator thought it important that it would not use its enforcement powers in a disproportionate manner. Mr Bailey advises that the FCA is continuing its supervisory engagement with firms and its 2018/19 Business Plan will set out the thematic work it will conduct over the next year on issues relating to MiFID II.
In the final part of his speech Mr Bailey discusses LIBOR noting that the work on the transition to alternative reference rates is underway but there are still issues with legacy contracts.
View Recent developments in financial markets, 1 March 2018