London, 28 January 2019 – The FICC Markets Standards Board (“FMSB”) has today published the final version of its Standard on Secondary Market Trading Error Compensation under its remit to improve conduct and raise standards in the wholesale Fixed Income, Currencies and Commodities markets.
The new Standard sets out expected behaviours that are designed to improve the practice of payment of compensation for trading errors. It advises that compensation should be paid in the following ways:
• By direct payment to the compensated party’s account; or
• By reducing or increasing net brokerage; or
• By another means which does not create a false market in, or a misleading impression as to the value or liquidity of a financial instrument.
The Standard makes clear that methods of compensation such as wash trades should not be used as these can create a misleading impression regarding volume or price in the market.
This Standard was previously issued as a Transparency Draft and the final version takes account of comments received from market participants.
All materials published by FMSB are available at www.fmsb.com.
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Notes to Editors
1) The Fixed Income, Currencies and Commodities (“FICC”) Markets Standards Board (“FMSB”) is an independent body set up by market practitioners to improve standards of conduct in wholesale FICC markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Ensuring that wholesale FICC markets are transparent, fair and effective is at the heart of the FMSB’s mission.
2) Setting up the FMSB was one of the main recommendations to emerge from the Fair and Effective Markets Review (“FEMR”), which was conducted by HM Treasury, the Bank of England and the Financial Conduct Authority.
3) The FMSB has a Board drawn from senior executives from across wholesale markets, from corporate clients, asset managers, sell side participants and intermediaries and infrastructure providers such as exchanges and custodians. Reporting to the Standards Board are standing sub-committees addressing Market Practices, Codes & Standards Convergence, Conduct & Ethics and Electronic Trading and Technology. The Market Practices sub-committees are split into 4 asset-class specific committees. There is also an Advisory Council representing the interests of Member firms.
4) The FMSB’s Members bring together sell-side investment banks, buyside asset managers, market infrastructure providers and exchanges, custodians and users of the market such as corporates. This constitution is unique. The Member firms are:
• Australia and New Zealand Banking Group
• BAE Systems
• Bank of America Merrill Lynch
• BNP Paribas
• BNY Mellon
• Citadel Securities
• Citigroup Global Markets Limited
• Crédit Agricole CIB
• Credit Suisse
• Deutsche Bank
• Goldman Sachs
• J.P. Morgan
• Legal & General Investment Management
• Linklaters (Legal Advisor)
• Lloyds Banking Group
• London Stock Exchange Group
• M&G Investments
• Morgan Stanley & Co. International plc
• National Australia Bank
• NEX Group PLC
• Rio Tinto
• Royal Bank of Canada
• Royal Dutch Shell
• Royal Mail Group
• Société Générale
• Standard Chartered
• Standard Life Aberdeen
• TP ICAP
• XTX Markets