The Issues and Challenges of Competition Policy in Direct Financial Markets

This article offers an analysis of the specific challenges that direct financial markets, such as money markets, markets for derivatives, currencies and bonds, pose to competition policy. These markets often fall outside the scope of tools developed in the context of traditional competition analysis, particularly those derived from theories based on the Structure-Conduct-Performance (SCP) paradigm. Drawing on a comprehensive review of the theoretical and empirical literature, we examine several fundamental issues related to competition policy in direct financial markets. First, we explore the question of market power and concentration in this sector from the theory point of view. Second, we discuss specific types of anticompetitive behaviour, such as collusion on benchmark prices, the potentially anti-competitive effects of information-sharing mechanisms and the growing role of algorithms and artificial intelligence (AI). We highlight the need to adapt the analytical frameworks and tools of competition policy in order to ensure effective competition, as well as legal certainty for financial market participants, both of which are essential to the proper functioning of these markets in a rapidly evolving environment.