The FICC Markets Standards Board (“FMSB”) today publishes a Transparency Draft of a new Statement of Good Practice on Information and Confidentiality for fixed income and commodities markets.
The question of what information may be shared between participants in these markets is complex and recent conduct events have drawn attention to the risks associated with sharing information in an inappropriate manner.
This Statement of Good Practice therefore seeks to bring clarity to the issue of sharing information in those markets and dealing with confidential information within a firm.
There are nine Good Practice Statements which firms should look to when considering their own practice in this area and cover issues including:
* Market participants should clearly identify and appropriately limit access to confidential information.
* Market participants should not disclose confidential information within their firms except to those persons who have a valid reason for receiving such information.
* Issues pertaining to the sharing of confidential information with parties outside of the firm, and,
* What can and cannot be discussed when discussing “Market Colour”.
The issue of “Market Colour” has recently become a source of particular concern to market participants - views shared between market participants on the general state of the market, the exchange of which can contribute to an efficient, open, and transparent market. The document states Market Colour relating to high-level, non-specific market activity can be freely shared when provided in general terms, sufficiently aggregated and anonymised, such that client confidential information cannot be “reverse engineered” from it.
Examples of what constitutes acceptable information sharing in some of the commonly encountered situations is included in the Statement of Good Practice, as are examples to distinguish between providing Market Colour and advice to a client.
Mark Yallop, Chair of FMSB said: “The use of and sharing of information within markets is a complex area around which there is significant uncertainty. This means market participants often avoid sharing any information which can reduce market liquidity; however, sharing of some information is necessary for markets to operate and sharing Market Colour can in fact make markets operate more efficiently. This Statement of Good Practice, the sixth now published by FMSB, seeks to provide clarity for market participants as to what is appropriate in terms of information sharing and how to deal with confidential information.”
FMSB members and other interested parties are invited to comment on the proposed Statement of Good Practice before it is finalised by FMSB. This consultation will run until 31 August 2018 with the final document expected to be published shortly thereafter.
This is the sixth Statement of Good Practice to have been published by FMSB since it was set up in 2015 in response to the Fair and Effective Markets Review in the UK with a mandate to improve conduct and raise standards in the wholesale Fixed Income, Commodity and Currency markets.