The Fair and Effective Markets Review (FEMR) was a comprehensive and forward-looking assessment of the way fixed income, currency and commodity (FICC) markets operate.
FEMR was led by the Bank of England, and co-chaired by the FCA and HM Treasury. The three organisations published the final report of the review, including findings and recommendations, on 10 June 2015.
The FEMR final report included 21 recommendations designed to ensure that FICC markets are fair and effective, and enhance the measures already in progress to tackle the issues highlighted by FEMR’s findings and recent enforcement actions.
Accepting the recommendations on behalf of the FCA Board, John Griffiths-Jones said:
'I wholeheartedly welcome the review’s recommendations on behalf of the FCA and its board and believe 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.'
The recommendations include measures to:
- raise standards, professionalism and accountability of individuals
- improve the quality and clarity and market-wide understanding of FICC trading practices
- strengthen the regulation of FICC markets in the UK
- launch international action to raise standards in global FICC markets, particularly the spot FX market
The FCA and HM Treasury have already implemented the Review’s October 2014 recommendation that a further seven key benchmarks should be brought within the scope of regulation, in addition to LIBOR, effective from 1 April 2015.
On 28 July 2016, the Chairs of FEMR published a full implementation report to the Chancellor of the Exchequer, the Governor of the Bank of England and the Chairman of the Financial Conduct Authority, detailing the significant progress that has been made to implement the Review’s recommendations.
A second Progress Report was published on 24 May 2018 to inform on how the recommendations have been implemented. The Report sets out an initial assessment of the impact of the Review’s recommendations and additional work done on strengthening individual accountability, improving market standards, embedding a forward-looking approach to FICC markets and strengthening benchmarks. As FICC markets continue to evolve, the three organisations will remain vigilant to ensure market practices and standards keep up with innovation, and market infrastructures remain effective and robust to manipulation. Industry remains at the heart of scanning the landscape for future risks.
These recommendations do not change the FCA’s current rules. However, if you operate in FICC markets you may consider it helpful to review whether any of the findings or recommendations of FEMR are relevant to your business.