Conduct body targets new issue hedging
The Fixed Income, Currencies and Commodities Market Standards Board (FMSB) has issued its draft guidelines for hedging new bond issues, to help deal with what the board describes as ‘conduct risks’. These include new issue hedging, moving the reference rate for the new bond; picking the reference rate in an unfair manner; and leaking out material non-public information through hedging activity.
Like the FMSB’s standard for underwriting new issues, the guidelines are high level — principles include suggesting reference rates for new issues are “selected on the basis of objective criteria”, and that the rate should be “observable and transparent”.
Other principles suggest “potential conflicts of interest inherent
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