Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Deferred
DMO cannot police GEMM behaviour effectively, making no changes despite manipulation risks.
Conclusion
The DMO stressed that it expected all GEMMs to “adhere 100%” to all regulations and the applicable laws, but because the DMO is not itself a regulator it cannot police the behaviour of the GEMMs. It added that GEMMs, which the DMO appointed, have “exclusive bidding rights at auctions” and it only sold directly to the GEMMs. The DMO explained that the way it designed how and when it sold gilts, together with the auction process, “deliberately minimises the chance of manipulation or collusion.” This included holding auctions during times when the market is most active, making it more difficult for a single player to start manipulating auctions. The DMO stated that during an auction, GEMMs “submit their bids blindly” meaning bidders are “in direct competition with each other”.14 Despite these steps, the DMO accepted that it could not categorically say that manipulation or collusion has “never happened in the past or that it might not happen in the future”. When asked what changes it was making to its processes in light of the CMA’s investigation, the DMO told us it was “not obvious” that there was a fundamental flaw in the system and therefore no changes have actually been made.15
Government Response Summary
The government agrees with the implicit recommendation and commits that HMT and DMO will write to the Committee with information within two months of the Competition and Market Authority’s investigation conclusion, deferring any further actions until then.
Government Response
Deferred
HM Government
Deferred
3.1 The government agrees with the Committee’s recommendation. Target implementation date: To be advised 3.2 As requested, HMT, together with the DMO, will write to the Committee with this information within two months of the conclusion of the Competition and Market Authority’s (CMA) investigation. There is currently no statutory deadline for when the CMA will issue a final decision on the case. The government will therefore look to inform the Committee with more information on timing in the future, subject to this being made available by the CMA.