Britain to unveil plans to clean up markets

London - Britain's regulators will unveil plans on Wednesday that aim to clean up behaviour in the financial markets, where banks have been fined billions of pounds for trying to rig currencies and interest rate benchmarks.

The Bank of England, treasury and the financial conduct authority will publish recommendations from their fair and effective markets review into conduct and operation of currency, bond and commodity markets.

FCA chief executive and co-chair of the review Martin Wheatley said: "It's going to say some quite significant things about what the scope of regulation should be for asset classes that historically have not been heavily regulated.

Market practices

The review will focus on how to raise standards of behaviour among traders at banks, recommend tougher sanctions and give markets more detailed guidance on what are acceptable trading practices.

Finance industry officials expect the review to take on board some of their ideas, such as cracking down on traders known as "rolling bad apples," making it harder for a rogue trader to get a job unchallenged at another bank.

Some expect a new independent body to help with providing guidelines on market practices and enforce a new global code of conduct that central bankers are already working on.

Wheatley said, for example, there was a need to determine more clearly when legitimate hedging in markets becomes abusive "front-running," where banks use information to trade on their own account ahead of customers.

Capital  charges

Guidance is also expected on when it is acceptable to pull out of a trade at the last minute in the currency markets, a practice known as "last look."

Given the global nature of forex, commodity and bond markets, Wheatley said international backing would be needed to make the review's recommendations effective in practice.

An industry official said British regulators could slap extra capital charges on banks that failed to apply the recommendations.