U.K. FCA Plans Review of Dark Pools, Big Data in 2015 Agenda

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Conflicts of interest in dark pools and how insurers use big data are two of the main areas the U.K. Financial Conduct Authority will look into over the next year, the regulator said in its annual business plan.

The FCA will also examine how asset managers charge investors starting early next year, the regulator said Tuesday in describing its market studies and thematic reviews through

2016. The dark pool and insurance inquiries will begin this year.

The U.K. regulator is planning a more ambitious agenda for 2015, increasing its budget by six percent as it comes under pressure to crack down on market abuse in the wake of scandals such as interest-rate and currency benchmark rigging. It’s already outlined plans to examine topics including competition in investment and corporate banking, announced in February, and added a “culture” review this year.

“Change in culture will only come when the tone at the top is right,” the FCA said in the business plan. “Firms must ensure that all of their processes support and reinforce the culture they want to promote.”

The regulator will increase its 2015-2016 budget by 27 million pounds ($40 million) to 479 million, primarily related to personnel and information systems to increase enforcement activities to combat market abuse, according to the report. The FCA’s enforcement powers will also be extended in April to allow the regulator to take action against anti-competitive behavior.

FX Fines

The FCA levied 1.47 billion pounds in fines last year, the vast majority of which was accounted for by the 1.1 billion-pound settlement five banks agreed to in November for misconduct and attempted manipulation of rates on their foreign-exchange trading desks.

Dark pools, private stock markets usually operated inside large banks, are under increasing scrutiny around the world. London-based Barclays Plc was sued in New York by Attorney General Eric Schneiderman last year over claims it engaged in a pattern of “fraud and deceit” with customers using the platform.

How firms use big data -- large collections of data that companies use to gather information on industry trends or people -- has also become an issue of increasing concern due to changing privacy rules and threats posed by hackers to cybersecurity.

The FCA said it will “identify potential risks and benefits for consumers, including whether the use of Big Data creates barriers to access products or services” of insurers.

Systems and controls to prevent financial crime was the one new area of concern identified in an annual risk report published Tuesday.

The FCA continues to review four other areas of focus that were highlighted last year. These are keeping up with technology, poor culture, acting in the best interests of long-time customers and the distribution of retirement products.