The world of finance should be prepared to face volatility as a constant, according to the Financial Conduct Authority's CEO, Nikhil Rathi.
He said capital markets and regulation have a vital role to play when it comes to facing constant volatility.
Rathi said solutions to this volatility include regulation that is proactive rather than reactive and can help firms grow.
Speaking at the FCA International Capital Markets Conference today (October 8), he said: "Our careers have been defined by some of the biggest crises the financial world has ever seen. But we’ve also seen how people have solved those crises. Or even prevented them. It’s what I love about this job, and the financial system. How it self-corrects. How it innovates."
Looking to solutions, he said nurturing liquidity was key to keeping agile. But he said, too often, rules designed for larger banks actually limit the ability of smaller firms.
He added: "At the FCA we’re exploring how adjustments could encourage wholesale trading and improve market liquidity…and may in turn reduce barriers to entry for specialised trading firms that don’t hold retail deposits.
"Just look at the way non-bank traders are now capturing flows across US equities. A massive shift, in the space of just a few years."
He also said there needs to be a shift from reactive to proactive regulation, with "a system guided by good outcomes, not just rules for the sake of it".
Rathi said: "The goal of regulation shouldn’t just be to step in when things go wrong, or respond to a crisis. We want to deliberately create an environment that helps firms compete, and grow."
The final two solutions he said were having a new mindset to risk and investing in infrastructure, such as cybersecurity.
When it came to artificial intelligence, Rathi said rather than rushing to new rules the FCA is looking to rely on existing frameworks.
tara.o'connor@ft.com
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