July 22, 2016 / 2:36 PM / 3 years ago

UK markets body publishes draft rule to stamp out manipulation

LONDON (Reuters) - An industry body published a standard on Friday that defines acceptable practice in financial and commodity markets, aiming to stamp out behavior that prompted regulators to fine Barclays for fixing the price of gold.

The Fixed Income, Currency and Commodities Markets Standards Board was set up last year by market practitioners to improve conduct in wholesale markets by tackling grey areas in practice.

The board published a new standard in draft form for public consultation to cover so-called binary options in commodities markets.

The options pay out a fixed amount or nothing, depending on whether the underlying price of a commodity hits a pre-agreed level at a specific point in time.

This created a conflict of interest between the bank selling the option and the customer.

The board was prompted by a 26 million pound ($34 million) fine for Barclays in May 2014 after a trader manipulated the setting of gold prices to avoid payment to a customer on an option.

“The new standard outlines the rationale for use of binary options and also makes clear the guidelines that market participants should follow to ensure they manage the conflict of interest in an appropriate fashion,” the board’s interim chair, Elizabeth Corley, said in a statement.

Regulators were involved in drawing up the new standard, she added. Last month the board published its first standard on reference price transactions in the fixed income rates markets. ($1 = 0.7637 pounds)

Reporting by Huw Jones

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