spillovers to asset markets. our analysis also shows that leverage increases the procyclical behaviour of investors and asset managers, even if they are not excessively leveraged. in any case, it is quite comforting that leverage in the european investment fund sector seems to be low, on average. average leverage multipliers reach only up to 1. 3 across different fund types. this is partly because about 60 % of all investment funds fall under the undertakings for collective investment in transferable securities ( ucits ) directive and so face tight leverage constraints. on the other hand, many alternative investment funds do not face any binding restrictions on leverage. among those alternative funds, we find a tail of highly leveraged bond and hedge funds, which sometimes have a leverage multiplier of more than 30. i urge authorities to use the new data which is available to shed more light on this highly leveraged part of the sector. 5 this may help to better understand some of the lightly regulated and less transparent activities where risks may be building up. for instance, private loan funds may potentially erode credit standards and take on higher credit risk in the current market environment, whereas private equity funds may facilitate excessive leverage in the non - financial sector. some of these activities may be escaping our attention, as statistics on them are scarce and they are often conducted by funds outside the euro area. leverage may be building up, for instance, by the use of derivatives or in off - shore centres. therefore, consistent reporting frameworks have to be developed with a view to gaining a system - wide perspective on evolving risks, also at global level. it will be important to develop comparable leverage measures in line with the recommendations of the financial stability board ( fsb ) to the international organization of securities commissions ( iosco ). 6 this will facilitate consistent monitoring and assessment of the build - up of risks in the investment fund sector. as the global crisis has shown, we cannot afford to be complacent and must remain vigilant to possible new risks that might emerge in the financial system. so we need to better understand the macroprudential dimension of risk in the investment fund sector. and we need to further enhance the sector ’ s resilience to system - wide shocks. possible macroprudential and other policy responses – what needs to be done? let me now set out a few regulatory actions which could contribute to mitigating risks arising from interconnectedness, liquidity and leverage in the investment

transparency. the most challenging area though was agreeing on the guidance that should be provided with regards to the specific topic of trading activity in the last look window. what is clear to me is that there is – at the very least – the potential for misuse of this specific feature, as various ongoing misconduct cases bear testament to. the code already provides guidance that is designed to minimise the risks of that misconduct occurring. the underlying debate, which our consultative process seeks to resolve, is whether there are ways of reducing those risks even further. if we can identify specific, legitimate, uses of this type of trading activity, as well as the already well - known illegitimate uses, we can then cater for both within the code. but if the evidence suggests that trading in the last look window is simply inconsistent with good conduct, this section of the code will need to be updated accordingly. it ’ s impossible for me at this stage to presuppose the outcome. what i want to emphasise is the gfxc ’ s commitment to acting on the evidence we receive. we are fully aware that the committee ’ s eventual conclusion has the potential impact on some firms ’ current business models, and that is why we are committed to establishing the broadest possible evidence base on which to take our decision. there are nine days remaining before the feedback window closes, and i encourage all of you – both price makers and takers – to provide us with your views. while the last look debate is the current centre of attention it is important to recognise that over time the committee will need to update other areas of the code. in some cases these might amount to tweaks to avoid unintended consequences ; in other cases they will be in response to further evolution in the market itself. and although crystal ball gazing is always a perilous exercise, if you take the agenda for this conference as a guide, then one area likely to remain in focus in coming years is transparency. http : / / www. globalfxc. org / consultative _ process. htm all speeches are available online at www. bankofengland. co. uk / speeches on the one hand the demand for market data will only continue to rise – for example, as end users demand transaction cost analysis tools and analytics to measure the quality of their execution and to predict the optimal time to execute trades. but on the other hand, growing market complexity and greater internalisation of flows tend naturally to reduce the ease with which