or vertical integration – raising potential conflicts of interest and concerns about information asymmetries. a number of recent misconduct cases have involved attempted collusion, abuse of market power or inadequate management or control of conflicts. the ability of ficc market participants to exercise market discipline against those engaging in misconduct may also have diminished somewhat in recent years. at the same time, the market maker system has delivered important benefits, including tight pricing and deep and near - continuous liquidity in a wide range of market conditions. that model is now changing, as increased risk aversion and regulatory reforms designed to return the cost of liquidity and capital to more sustainable levels favour more agency - based trading models. the potential diminution of liquidity in some ficc markets has been raised as a concern by many investors and end - users. this is therefore a finely balanced issue for us to explore. how are competitive conditions likely to change, and what lessons can be learned from other markets, both in the financial sector and more widely? what could be done to strengthen market discipline? is there sufficient awareness of the scope and nature of the authorities ’ competition powers? and how best can conflicts of interest intrinsic to specific trading models be managed? 3. benchmarks the third category is benchmarks. there has already been substantial reform in this area, as i have mentioned, and more is on its way. the question we ask in the consultation document is whether this goes far enough. could steps be taken to reduce or diversify the reliance of asset managers and other investors on benchmarks? are there additional changes that could be made to improve their design, construction and governance? what further measures are required to ensure full compliance with iosco ’ s standards for better benchmarks? and how can the regulatory framework provide protections to market participants in other jurisdictions in a proportionate way? we then turn to the three conduct categories. as i mentioned at the outset, every act of misconduct starts with an individual ’ s decision – and that individual should be accountable for that decision. but that decision is also heavily shaped by the environment or “ the barrel ” that individual works in – by the standards or norms established by regulation, market practice and firm - level expectations ; by the extent to which responsibilities are clearly allocated and governed ; by the incentives that an individual is given, financial or otherwise ; bis central bankers ’ speeches by the perceived probability of being caught ; and by the expected penalty if he or she is caught. the recent speeches by bill dudley

on ending too big to fail on the global stage, and in the uk we have transformed the way that we regulate banks and how we set policy to deliver financial stability. but some of the benefits of these advances are being offset by a long tail of outrageous conduct cases. these are like salt rubbed into the wounds to public confidence in financial markets. this is in no one's interest. many leaders in the financial industry and the majority of those who work in these markets are ashamed of this bad behaviour and want to find a way to put it comprehensively behind them. the fines alone have been sufficiently large to require substantial reshaping of firms ’ businesses. i am confident we can find a way forward. i recall the story of when the queen visited the lse in november 2008 and asked the gathered assembly of eminent economists why had nobody noticed that a crisis was on its way? the reply came in the form of a letter from the british academy7. their bottom line was that the crisis was caused by “ a failure of the collective imagination of many bright people, both in this country and internationally to understand the risks to the system as a whole. ” this is a moment when we need collective imagination – to imagine financial markets that are fair and effective and work in the interests of all of us. http : / / www. britac. ac. uk / templates / asset - relay. cfm? frmassetfileid = 8285 bis central bankers ’ speeches figure 1 : global financial assets us $ trillions corporate bonds financial companies'bonds government bonds nominal world gdp figure 2 : market value of ficc derivatives contracts bis central bankers ’ speeches figure 3 : the review framework bis central bankers ’ speeches