LONDON, June 2 (Reuters) – The Financial Services Authority’s (FSA) decision to fine a London coffee broker 100,000 pounds ($146,400) and ban him from working in the financial services industry marks a significant toughening in the market abuse regime for commodities.
The banning order on Andrew Kerr marks the first successful action for market abuse in commodity markets. Kerr is accused of helping a client execute large orders during a period in which reference prices were set based on a volume-weighted average. It was a deliberate move to influence market prices in the run up to an option expiry.
While Kerr’s behaviour was unusually blatant, and unfortunately for him captured on tape in unguarded language, using large volume trades to support or batter market prices close to daily or option settlements is common practice across commodity markets.
It has been tacitly supported by much of the industry as well as the regulator. So the decision to make an example of Kerr suggests a marked tightening of the rules, or at least the way they are implemented.
LOOPHOLE IN EU REGULATIONS
I have written before that the problem stems from a conflict at the heart of the EU’s Market Abuse Regime.