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Fair and Effective Markets Review (FEMR): Competition law & Wholesale Markets

FEMR Update: Competition law & Wholesale Markets

16th September 2015

Today the FCA published an overview of on Competition Law and Wholesale Markets as the latest update to the recommendations of the Fair and Effective Market Review (FEMR).

With recent headlines regarding market manipulation and attempts to undermine the principles for fair and effective markets competition – you only have to think of the recent FX and LIBOR scandals –clarity on the regulator’s expectations and recommendations with regards to the competition law couldn’t come at a better time.

The FCA’s Overview covers:

Why does awareness of competition law matter?

What are the penalties for breaching competition law?

What types of behaviour could breach competition law?

Who is responsible for competition law in the UK and Europe?

Reporting knowledge of suspicion of breaches of competition law and the leniency programmes

What is the UK Fair Effective Markets Review (FEMR)?

Launched by the Chancellor in June last year (2014), the Fair and Effective Markets Review was to provide a comprehensive and forward-looking assessment of how the following markets operate:

Fixed Income



The above markets are collectively referred to as ‘FICC’ markets. The review of these markets was led by the Bank of England and co-chaired by HM Treasury and the Financial Conduct Authority (FCA) with the final FEMR report published this summer on 10th June 2015.

What was in FEMR’s final report?

FEMR’s final report laid out 21 recommendations under six over-arching proposals - the first four of which gave near-term recommendations to raise conduct standards by proposing that:

1. Individuals active in FICC markets should be more accountable for their actions, (thus raising standards, professionalism and accountability);

2. Firms active in FICC markets should take greater collective responsibility for developing and adhering to clear, widely understood and practical standards of market practice, in regular dialogue with the authorities (i.e. Improve the quality, clarity and market-wide understanding trading practices within FICC markets);

3. UK authorities should extend the regulatory perimeter, broaden the regime holding senior management accountable and toughen sanctions against misconduct, thus strengthening regulation of FICC markets within the UK;

4. International authorities should collaborate to raise standards in global FICC markets

The final two over-arching proposals aimed to address what the Chair of the FEMR considered one of the key lessons of the financial crisis – this being that “the ‘hard’ infrastructures supporting markets, and the ‘soft’ infrastructures (standards and norms) by which those markets operated, failed to keep pace with market innovation”.

Thus to prevent the same problem from happening again, the proposals recommend that authorities and market participants need to work together in the years to come to:

5. Promote fairer FICC market structures while also enhancing effectiveness; and

6. Ensure a more forward-looking approach to the identification and mitigation of conduct risks.

Each of the FEMR’s 21 Recommendations made under these proposals was designed to ensure that FICC markets are fair and effective and that the measures already in progress to deal with the issues revealed in FEMR's findings (as well as in recent enforcement actions) are enhanced.

With regard to the 21 Recommendations, FCA Board, John Griffiths-Jones said:

“they will make a real difference to the consumers and businesses that ultimately rely on these markets. Putting good conduct and accountability at the heart of these vital global markets will safeguard their future integrity, and the UK’s pre-eminent position in them.”

What next for firms?

The regulator will now aim to ensure that FICC market participants have a greater awareness and understanding of the existing framework on competition law as well as stressing their expectations.

In summary, the FCA expects market participants to compete:

on the basis of merit;


to be able to form;

to be able to discover; and

to be able to trade at competitive prices.

It is recommended that firms familiarise themselves with the findings of FEMR’s final report and in particular with today’s high-level summary of the competition law framework and how it is enforced by the FCA.

Compliance Support & Assistance:

If you should like any assistance in understanding or implementing your obligations under the competition law framework then get in touch with our helpful and friendly Compliance Support team.

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