The financial industry has more than doubled its spending on surveillance technology as the UK government starts a review of fixed income, currency and commodity markets.

George Osborne, the UK Chancellor of the Exchequer, said in a speech yesterday that the manipulation of Libor added further damaged the reputation of financial services.

He said: “The integrity of these markets matters to us. London is home to 40% of the global foreign exchange business; 45% of over-the-counter derivatives trading; and 70% of trading in international bonds.”

The Chancellor announced that the Treasury, the Bank of England and the Financial Conduct Authority, the UK regulator, will conduct a comprehensive review of standards in fixed income, currency and commodity markets and produce its report in a year.

The Fair and Effective Markets Review will be chaired by Minouche Shafik, the new deputy governor of the Bank of England,and former deputy managing director of the IMF. She will be joined by Martin Wheatley, chief executive of the FCA, and Charles Roxburgh, director general, financial services at the Treasury.

The review will also consult a panel of market practitioners, chaired by Elizabeth Corley, chief executive of Allianz Global Investors.

In addition the UK government is extending the new powers it put in place to regulate Libor to cover further major benchmarks across foreign exchange, commodity and fixed income. The government will consult on the full list of benchmarks to be covered by this autumn and have a new regime in place by the end of this year.

Matthew Coupe, director, regulation and market structure, at Nice Actimize said the firm’s holistic surveillance service, which has been under development for 18 months ago, can monitor phone calls, mobile apps, emails, chat, social media, and video. Nice Actimize provides financial crime, risk and compliance technology for regional and global financial institutions and government regulators.

“This year we have seen an incredible uptick in the provisional budgets set aside for this service,” Coupe added. “Financial institutions want to be able to monitor all the different elements of a transaction in one workflow.”

Coupe said firms and regulators have found they cannot copy surveillance from the equities market but need to introduce procedures across asset classes.

“Spending on surveillance has reached unprecedented levels and budgets have more than doubled,” Coupe said, citing analyst reports. “The industry has realised that it can’t look at foreign exchange on its own as asset classes are interlinked.”

Agency broker ITG said in an email to Markets Media that tightening controls should help ensure a fairer trading environment for all participants and the market would benefit significantly from more oversight and transparency.
ITG said: “The same technology that makes the foreign exchange market more transparent would allow central banks to monitor the market more closely.”

The British Bankers Association said in a statement that it supported the broad thrust of the proposals in the Chancellor’s speech to widen legislation to include criminal sanctions covering foreign exchange, fixed income and commodities.

Anthony Browne, chief executive, of the BBA said: “The UK already has one of the toughest regulatory regimes for banks anywhere in the world. If got right these proposals would be a sensible extension of that system.

Featured image via Tomasz Zajda/Dollar Photo Club