FMA also published its expected controls in relation to trading
The Financial Markets Authority (FMA) published its guidance on conduct and expected controls in relation to trading that sets the Bank Bill Benchmark Rate (BKBM) and closing rates, the regulator announced this morning.
Alongside this, the FMA is also publishing an overview of BKBM and benchmarks, their purpose and how they are regulated.
The FMA said one of its strategic priorities is capital market growth and integrity. It also wants to establish expectations in the wholesale markets that support public and business confidence in their integrity.
FMA Director of Capital Markets Garth Stanish said: “By clarifying our expectations of conduct and controls, we’re aiming to reduce regulatory uncertainty and encourage participation in these benchmarks. Some banks have stopped participating in recent years and with that comes an increased risk that benchmarks won’t be robust.”
The guidance sets out what the FMA is looking for when assessing trading conduct, its expectations and further sources of guidance.
It also makes clear that should the FMA see evidence of trading that has been undertaken for the purpose of moving the BKBM or another rate, the FMA will take appropriate and proportionate action.
There has been significant publicity around misconduct relating to various global benchmarks such as LIBOR and EURIBOR in recent years. In 2014, the FMA analysed a sample of trading and other data relating to BKBM between 2013 and 2014.
The FMA has conducted further targeted enquiries into specific conduct since then, but have found no evidence of systemic trading in bank bills that was not for legitimate purposes. However, the FMA will continue to engage with banks and overseas regulators on this topic.
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Alongside this, the FMA is also publishing an overview of BKBM and benchmarks, their purpose and how they are regulated.
The FMA said one of its strategic priorities is capital market growth and integrity. It also wants to establish expectations in the wholesale markets that support public and business confidence in their integrity.
FMA Director of Capital Markets Garth Stanish said: “By clarifying our expectations of conduct and controls, we’re aiming to reduce regulatory uncertainty and encourage participation in these benchmarks. Some banks have stopped participating in recent years and with that comes an increased risk that benchmarks won’t be robust.”
The guidance sets out what the FMA is looking for when assessing trading conduct, its expectations and further sources of guidance.
It also makes clear that should the FMA see evidence of trading that has been undertaken for the purpose of moving the BKBM or another rate, the FMA will take appropriate and proportionate action.
There has been significant publicity around misconduct relating to various global benchmarks such as LIBOR and EURIBOR in recent years. In 2014, the FMA analysed a sample of trading and other data relating to BKBM between 2013 and 2014.
The FMA has conducted further targeted enquiries into specific conduct since then, but have found no evidence of systemic trading in bank bills that was not for legitimate purposes. However, the FMA will continue to engage with banks and overseas regulators on this topic.
Related stories:
Investment home truths
Council welcomes FMA’s KiwiSaver report
