Market abuse and the commodities markets

Pages482-486
Published date20 November 2007
DOIhttps://doi.org/10.1108/13581980710835317
Date20 November 2007
AuthorKyri Evagora,Gerald Licnachan
Subject MatterAccounting & finance
FEATURE
Market abuse and the
commodities markets
Kyri Evagora and Gerald Licnachan
Reed Smith Richards Butler, London, UK
Abstract
Purpose – The growth of the commodities markets and the increasing investment by non-traditional
market participants, such as pension and hedge funds, has come to the attention of the Financial
Services Authority (FSA), which has shown growing concern over the risks and challenges faced by all
stakeholders in these markets.
Design/methodology/approach – This is a review paper relying on an analysis of the present
situation.
Findings – Recent trends and significant developments in the commodities markets have not gone
unnoticed by the UK’s financial services watchdog. The FSA has indicated an increased degree of
interest in the commodities markets and has signalled a shift in its approach towards regulating them.
Originality/value – The paper raises awareness and highlights issues surrounding financial
regulation.
Keywords Regulation, Financial markets, Financial risk
Paper type General review
The recent trends and significant developments in the commodities markets have not
gone unnoticed by the UK’s financial services watchdog. The growth of the
commodities markets and the increasing investment by non-traditional market
participants such as pension and hedge funds has come to the attention of the Financial
Services Authority (FSA), which has shown growing concern over the risks and
challenges faced by all stakeholders in these markets (Doyle et al., 2007). The FSA has
indicated an increased degree of interest in the commodities markets and has signalled
a shift in its approach towards regulating them.
FSA concerns
The commodities markets have traditionally received less regulatory attention than
other larger and more high-profile markets such as the equity markets. This was, in
part due to the specialised nature of commodity markets which, in the FSA’s view, are
by and large dominated by professional participants working to a presumption of
caveat emptor. The FSA has also generally considered the commodity derivative
markets to pose a lower risk than the equity markets because of the knowledge base of
traditional market users. Recent developments and increasing activity in the
commodities markets have, however, caused the FSA to identify areas of potential risk
as regards to behaviour constituting market abuse. In particular, the FSA has flagged
up the growing number of market participants and the changing nature of these
participants as factors that are a cause for concern.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
JFRC
15,4
482
Journal of Financial Regulation and
Compliance
Vol. 15 No. 4, 2007
pp. 482-486
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980710835317

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