Bloomberg News

U.K. FSA to Target Brokers Receiving Payments From Market-Makers

October 12, 2011

Oct. 12 (Bloomberg) -- The U.K.’s Financial Services Authority proposed that brokers that receive payments from market-makers in return for orders be forced to prove to clients that the deal didn’t damage their trade.

The practice, known as payment for order flow, may “lead to client detriment through breaches of our conflicts of interest, inducements and best execution rules,” according to a report on the FSA’s website today. Brokers would be banned from accepting payments unless they can prove it doesn’t hurt customers.

“It is difficult to see any advantage in the payment for order flow arrangements for the end client,” the FSA said. “For this reason, PFOF is a serious concern for the FSA.”

The European Commission, the 27-nation European Union’s executive arm, is scheduled to propose this month an overhaul of trading rules for financial markets following the 2008 contraction in the credit markets that followed the collapse of Lehman Brothers Holdings Inc.

--Editors: Anthony Aarons

To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net;

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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