Response by the Building Societies Association to the Financial Services Authority DP25: development of transaction monitoring systems
Our comments are limited to the reference in Chapter 5 of Discussion Paper 25 to the possibility of extending the current transaction reporting requirements to firms such as building societies.
SUP17 in the FSA Handbook requires certain firms authorised under the Financial Services and Markets Act 2000 to report details of their trades in equity and debt securities, and related index and derivative transactions, daily to the FSA.
Paragraph 5.3 of DP25 notes that building societies are among the categories of firm not currently covered by the transaction reporting rules in SUP17, and so the FSA does not see their transactions. The FSA considers that this creates a loophole in its monitoring efforts and that it should see transactions conducted by all UK authorised firms. The FSA is therefore considering extending the scope of its reporting requirements to all authorised firms who undertake reportable transactions (subject to certain possible exceptions).
The Association appreciates that the FSA might wish to see details of relevant transactions of all authorised firms, and notes that formal proposals (accompanied by appropriate cost benefit analysis) will be included in a future consultation paper.
At this stage we would make the following observations -
In the light of the above it is not clear that there would be many (if any) opportunities for a building society to manipulate a market by its trades, or otherwise undertake any form of market abuse. Accordingly, we would ask the FSA to reconsider extending the scope of transaction reporting to building societies.
However, if the FSA should decide to continue with such a proposal we would ask that the timing of its introduction be considered carefully in the light of the numerous other changes to regulatory and reporting requirements affecting building societies that are due to take place from now until 2007. These include mortgage and general insurance regulation, new requirements for capital adequacy and liquidity, new reporting requirements (covered in CP197 and CP198), and further changes to reporting that will affect only building societies at some point between 2005 and 2007 (in relation to a new requirement to report detailed information direct to the Bank of England (for monetary statistics purposes) that is currently reported, in a different form, to the FSA). Building societies have limited staff and resources able to deal with such developments.