The traders complained the regulator did not take sufficient action to prevent market abuse on a number of exchanges.
In a letter dated 17 April, the commissioner acknowledged the complainants, a group of independent traders in London, had provided “considerable information” which they believed supported their allegation the markets were subject to abuse but the FSA failed to act upon it.
In documentation published by the commissioner, the complainant highlighted as one example that they have been involved in futures for the last 30 years and have been on many abuse committees and finds it “strange” how regulators ignored abuse claims from senior traders.
The traders also claimed they mentioned these during the London inter bank offered rate abuse from 2007 onwards.
The commissioner flagged up that the file presented to him by the FSA indicated it had received a “considerable amount” of correspondence from the group in relation to alleged market abuse and that some of the emails sent to the regulator are “unwarranted” in their tone and approach.
The commissioner also said it was “clear” the FSA had engaged to establish why the group felt the markets were being abused, but he added he had not seen “specific” examples of transactions which the traders believed were suspicious.
The commissioner said for the regulator to act, “it must be able to prove that market abuse is taking place” and that formal evidence is required for it to do so, despite the traders inviting the FSA to view the trading screens with them.
For the FSA to take action against a firm, the commissioner said it must have evidence to prove that market abuse is taking place and it was “unclear” whether viewing the trading screens would have enabled the regulator to identify which firms were conducting market abuse.
The commissioner also highlighted due to the limitations of the Financial Services and Markets Act, the FSA was unable, other than in limited circumstances, to disclose any information about what action it did or did not take against a firm or individual.
In communication to the commissioner, the traders said “the level of secrecy seems ridiculous and really should be challenged by the commissioner.”
However the commissioner said while this may seem “ridiculous” the regulators have to comply with the act and the legislation can only be challenged or amended by parliament.
The commissioner did not uphold the complaint and advised the traders to raise this issue with their MP.