FCA probes potential QE manipulation


The Financial Conduct Authority is investigating whether traders attempted to push up the price of gilts before trying to sell them to the Bank of England in 2011.

Bank of England executive director for markets Paul Fisher told MPs yesterday that the second round of quantitative easing could have been “manipulated” by gilt edged market makers in October 2011.

Details of the potential case of market manipulation have been passed on to the FCA. The incident relates to a reverse auction – where market-makers sell gilts rather than purchase them – when a sharp rise in the price of a 2017-dated gilt led to the Bank refusing to buy that bond.

Fisher told the Treasury select committee: “It was very obvious to us what was happening because one gilt was moving in the opposite direction to other gilts in the market, so there was a clear signal.

“We’ve never seen anything like that previously and we’ve never seen anything like that again.”

Asked if manipulation had definitely taken place, Fisher added: “There was that risk. I did not have the information to conclude that.”

The FCA says it does not comment on any ongoing investigation.

There are 21 banks that act as primary dealers in the UK government bond market, including some of the world’s biggest financial institutions.