MARKET MANIPULATION, the action of artificially increasing or decreasing the price of an asset, derivative or index to make a profit, has escalated dramatically over the past two years in London’s financial centre.
There have been a staggering 822 reports of suspected market manipulation made to the Financial Conduct Authority, FCA, in 2019.
City of London law firm RPC has warned the problem that came to light during 2012’s LIBOR scandal is still happening.
Simon Hart, Partner in RPC’s Banking and Financial Markets Disputes team said: “These statistics show that market manipulation has not gone away as a problem.”
“Whilst banks, brokerage firms and other market participants have significantly improved their compliance controls over the years, it is clear that problems remain.
Mr Hart suggested that one reason for the increase in reports of manipulation was a consequence of the new regulations brought in after the LIBOR scandal.
He added: “However, the very existence of better internal systems and controls may itself be leading to more concerns being identified and reported.
“It is often in periods of major market turbulence that more serious examples of market manipulation get unearthed.
The partner of the RPC law firm highlighted that suspicious transactions and manipulating prices, although having reduced somewhat since 2012 would still have a detrimental affect on confidence on the financial system and those who were trading in a legal way.
“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.
“Every distorted market carries a cost for someone.”
After the LIBOR scandal of 2012, market manipulation in this way was deemed a criminal act.
A UK law was passed called the Financial Services Act 2012, but this does not seem to have had the desired effect of discouraging artificial that sows the seeds of insecurity in free market economies.
Equities and equity derivatives are the main areas for the fabricated elevation or decrease of price, they accounted for 60 percent of reports of manipulation to the Financial Conduct Authority, FCA.
LIBOR, or the London Inter-bank Offered Rate, is the average interest rate that banks apply to inter-bank loans, now handling $350 trillion in derivatives, the 2012 scandal revealed how these interest rates were being manipulated.
According to MIT finance professor Andrew Lo the amount of illegal profit made by some of the world’s largest financial institutions, “dwarfed by orders of magnitude any financial scam in the history of markets”.
But now, according to City law firm RPC the figures reveal it seems to be happening again.
