A review of financial and regulatory reforms in the gilt‐edged market
| DOI | https://doi.org/10.1108/13581980610659477 |
| Pages | 165-173 |
| Published date | 01 April 2006 |
| Date | 01 April 2006 |
| Author | Farooq Ahmad,David Lal |
| Subject Matter | Accounting & finance |
FEATURE ARTICLE
A review of financial and
regulatory reforms in the
gilt-edged market
Farooq Ahmad and David Lal
Aberdeen Business School, Robert Gordon University, Aberdeen, UK
Abstract
Purpose – Aims to examine and evaluate the financial and regulatory reforms in the gilt-edged
market.
Design/methodology/appro ach – Reviews recent financial and regu latory reforms in the
gilt-edged market.
Findings – Finds that, overall, the gilts market has maintained its safe haven status during periods
of both stability and uncertainty.
Originality/value – In its examination of the gilt-edged market, this paper concludes that recent
reforms have been very successful in maintaining its competitiveness.
Keywords Gilt edged securities,Financial restructuring, Banking
Paper type Viewpoint
1. Introduction
It has been well established that the global financial sector is subject to more regulation
and scrutiny as compared to other formal sectors of the economy, and the intensity of
this scrutiny is increasing. This behaviour is amplified when financial markets
undergo a process of continuous innovation in operations and instruments, and hence
require accompanying changes in regulatory and monitory frameworks. Insofar as the
UK gilt market is concerned, it too has been the subject of a series of reforms during the
last 15 years, so much so, that partial recognition of its previous structure is difficult.
Against this backdrop, the primary objective of this study is to present a record of
these reforms[1] with a view to evaluating them in terms of both their justification –
and – their impact on the efficiency of the UK gilt market.
Gilts are risk-free debt securities (bonds) issued on behalf of the British government
to finance its borrowing requirements. The UK gilt market is a continuous multip le
dealer – quote driven market, and there are currently 16 gilt-edged market makers
(GEMMs). GEMMs quote on request bids and ask for a number of different bonds,
which differ by maturity and type. Throughout this activity, GEMMs are facilitated by
four inter-dealer brokers, who allow them to unwind inventory imbalances
anonymously and rapidly, and by a large number of stock exchange money brokers.
With this in mind, the organisation of this study is as follows: Section 2 outlines the
primary market reforms; Section 3 addresses issues associated with the secondary
market reforms in the gilt market; Section 4 evaluates the impact of these reforms on
the overall efficiency of the gilt market; and the final section presents conclusions for
the paper.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
Financial and
regulatory
reforms
165
Journal of Financial Regulation and
Compliance
Vol. 14 No. 2, 2006
pp. 165-173
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980610659477
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