The FICC Markets Standards Board (FMSB) has published a Transparency Draft of a new Statement of Good Practice on Information and Confidentiality for fixed income and commodities markets.
The FMSB says the proposed guidance is not intended to apply to the FX markets, which is covered by the FX Global Code, or to the precious metals markets, which is covered by the Precious Metals Code, rather it seeks to build on those works for the fixed income and commodities markets.
The board says the question of what information may be shared between participants in these markets is “complex”, adding that recent conduct events have drawn attention to the risks associated with sharing information in an inappropriate manner.
The 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. It includes nine practices, which firms should look to when considering their own practice in this area and covers issues including market participants clearly identifying and appropriately limiting access to confidential information.
It also says that market participants should not disclose confidential information within their firms except to those persons who have a valid reason for receiving such information and highlights issues pertaining to the sharing of confidential information with parties outside of the firm.
It covers the tricky area of “market colour”, which the FMSB says has become “a source of particular concern to market participants” and 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. ?
“The use of and sharing of information within markets is a complex area around which there is significant uncertainty,” says Mark Yallop, chair of FMSB. “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. The proposed Statement can be found here.?