COMMODITY BENCHMARKS COULD FALL UNDER UK REGULATORY SCRUTINY / THOMSON REUTERS

Commodity benchmarks could fall under UK regulatory scrutiny

Tue, Oct 1 2013

By Clara Denina


ROME, Oct 1 (Reuters) - Key commodities benchmarks could be subject to UK market abuse rules, a British financial markets regulator said on Tuesday, with stiff fines or prison sentences possible as punishments for the manipulation of prices.

Global financial markets have come under increasing scrutiny from regulators following the scandal around the manipulation of interest rates -- namely the London Interbank Offered Rate (Libor).

"After the Libor scandal, we started to look at various benchmarks," Don Groves, technical specialist at the Financial Conduct Authority, told a gold industry conference in Rome.

The Financial Services Act 2012 brought Libor under UK regulatory oversight, making it a criminal offence for knowingly making false or misleading statements relating to benchmark-setting.

"If the HM Treasury decides that other things like gold... should be covered as a benchmark, then we will add those to the list," Groves said.

Libor is the estimated interest rate set daily by leading London banks at which they would be charged when borrowing from other banks.

The gold market has its own equivalent -- the Gold Forward Offered Rates (GOFO) -- at which dealers will lend gold on swap against U.S. dollars.

"I don't want to give you the impression that the UK is picking on bullion  (but) I believe in the medium- long term politicians will want the regulators to focus on consumers' issues," Groves said.

"So if you think about it, things like natural gas, oil, electricity there are a lot of commodities out there and I think that we are probably eventually going to see something like a benchmark for those particular commodities."

The London Bullion Market Association said on Sunday it could charge its member banks more or even disband GOFO due to the string of new regulations in the financial markets. (Writing by Susan Thomas, editing by Veronica Brown and)


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