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Britain Shortens Reins over Market
The British Financial Services Authority has announced new requirements for participants on the financial market. The agency will monitor all electronic communications among companies concerning the buying and selling of financial instruments subject to its authority, even listening in on telephone conversations. The FSA is trying to minimize risks of price manipulation and securities manipulation. The new requirements will affect all Russian banks and companies doing business in Great Britain and will go into effect in March 2009.
Many Russian banks and investment companies have offices in Great Britain, among them Renaissance capital, Troika Dialog, Metropol UK, Aton, Kit finance, Alfa Capital Markets and VTB. Global financial companies, such as Deutsche Bank, Citi, Morgan Stanley and JP Morgan also deal in Russian securities. The FSA did not specify what incidents inspire the crackdown. Societe Generale trade Jerome Kerviel recently caused that bank €4.9 billion in losses through illegal activities.
A common form of manipulation is “frontrunning,” on which a trader receives an order for securities and obtains them for himself before selling them to the client, causing their price to rise sharply in the meantime. Insider trading is also a problem. It has been noted in deals with Norilsk Nickel stock recently, as owners Mikhail Prokhorov and Vladimir Potanin divide the company's assets between themselves. On October 4 of last year, deals with Sberbank stock coinciding with rumors of bank president Andrey Kazmin's resignation caused the price of it to fall 2.5 percent.
Russian companies that will fall under the purview of the FSA have declined to comment on the new rules. One bank executive noted that saying that the rules will cut down on manipulation would be an admission that such practices exist. Observers note that most companies already record the communications of their employees for use in disputes. Manipulation occurs in spite of those efforts, and is likely to continue in spite of the FSA's measures. There are no rules of comparable severity anywhere else in Europe.
www.kommersant.com
All the Article in Russian as of Mar. 06, 2008
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