Unit 3 / Section 3 - For the Market

Question 1

What is the (regulatory) market integrity objective in place to do?

Answer 1

Help to protect and enhance the overall integrity of the market

Question 2

What 4 threats are there to the achievement of the market integrity objective?

Answer 2

1) To the soundness, stability and resilience of the market
2) To the transparency of the price information process in those markets
3) To the orderly operation of the financial markets
4) To reducing financial crime in the markets, including action against market abuse

Question 3

For what market conduct reason do regulators intervene with regulated firms?

Answer 3

To make markets more efficient and resilient, improving integrity and choice

Question 4

What does BIS stand for?

Answer 4

The Bank for International Settlements

Question 5

What is meant by “Liquidity”?

Answer 5

The ability of a firm to convert its assets into cash to pay debts as they fall due.

In financial services, firms need liquidity to be able to trade effectively.

Question 6

What are advantages of price comparison websites, consumer feedback forums and best buy tables?

Answer 6

They enable consumers to access a lot of basic information quickly, reducing search costs.

Question 7

What are disadvantes of price comparison websites, consumer feedback forums and best buy tables?

Answer 7

Customers may form premature or inaccurate biases based on these tools, which can subsequently affect their decision-making.

E.g. Focus only on headline interest rates rather than evaluating the product or firm fully.

Additionally, it may be that consumers focus on one element (or measure) of the product or service above all else.

Question 8

What is Regulatory Arbitrage?

Answer 8

When firms capitalise on less stringent regulatory systems or requirements in order to get around unfavourable or onerous regulation, or attempt to gain competitive advantage through relocation to a location where regulations are thought to be lenient.

Question 9

How can firms commit Regulatory Arbitrage?

Answer 9

1) Restructuring transactions
2) Financial engineering
3) Geographic relocation

Question 10

What are the core functions of the market?

Answer 10

1) Provide transparent products and services to current and potential customers
2) Generate revenue
3) Enhance confidence and competition in the markets.

These lead to stability and long-term viability, and helps to avoid a repeat of the impacts of the global financial crisis.