U.K. Market-Abuse Reports Rise as Virus Poses Another Threat

(Bloomberg) -- Market manipulation is still on the rise in the U.K. even after a decade of crackdowns on schemes to rig foreign-exchange rates and other key benchmarks. And the coronavirus pandemic could make things worse.

Reports of suspected market manipulation made to the Financial Conduct Authority have increased by 23% since 2017, with a sharp jump in 2018 followed by a slight increase last year to 822 notifications, according to a study by London law firm RPC.

Simon Hart, a lawyer at RPC, says the data shows the problem “has not gone away” despite FX and Libor probes that yielded tens of billions in penalties globally and the conviction of trader Tom Hayes.

And the coronavirus could create another wave of suspicious activity. Last month, Dechert LLP said in a report that any market chaos may present increase companies’ exposure to market abuse, including insider trading.

“It is often in periods of major market turbulence that more serious examples of market manipulation get unearthed,” the London-based lawyer said.

RPC said in a statement that 60% of reports to the FCA last year related to suspected manipulation of equities and derivatives.

“Market manipulation does not need to be on the scale of the LIBOR or FX for there to be a negative economic impact on other innocent market participants,” Hart said. “Every distorted market carries a cost for someone.”

The law firm believes most of the reports were made by brokers, trading houses and fund managers who identify suspicious price movements or order flows being posted by other market participants.

Attorneys at Dechert had warned in a note last month that the disruption due to the coronavirus pandemic means executives and back office staff may fall through the cracks of compliance operations. To mitigate risks, Dechert suggested conducting market-abuse training covering the specific concerns posed by the outbreak.

©2020 Bloomberg L.P.

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