Bank tells firms to lobby Treasury
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Your support makes all the difference.THE Bank of England is so concerned about the potential impact of new insider dealing legislation on gilts market-makers that it is urging firms to lobby the Treasury directly.
There are widespread fears in the market that the legislation could restrict firms' ability to deal in large blocks of gilts, by treating as inside information knowledge of big deals that the firms themselves are planning.
This is the first time gilts have been included in insider dealing legislation.
Market-makers act as both brokers and dealers and use their knowledge of what is going on in the market to judge prices and risks. 'This is a minefield which will reduce our ability to do business,' said a senior specialist. There is concern that the legislation could hamper the market's relationship with the Bank.
Another senior dealer said: 'If we have a seller of pounds 300m of long gilts and we make money on the fact that we know we do have a seller, it could be construed as inside information.' He added: 'We could get regulated right out of business. If that happened we would never be able to raise pounds 1bn a week for the Government.'
The Bank has analysed the likely problems thrown up by the legislation for itself and the market-makers. But there is concern that the market-makers have not yet lobbied hard enough.
There are understood to have been representations to the Bank from only two firms. The Treasury has had no direct complaints.
The legislation has been through the House of Lords and is awaiting a second reading date in the Commons. Anthony Nelson, the economic secretary at the Treasury, has promised guidance notes for City dealers that he says will remove their concerns. But the notes will not be ready until the committee stage of the Bill.
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