Simon M Potter: The role of best practices in supporting market integrity and effectiveness Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the 2016 Primary Dealers Meeting, Federal Reserve Bank of New York, New York City, 7 September 2016. *  *  *  I would like to thank Radhika Mithal and Michelle Ezer for their excellent assistance in the preparation of these remarks, as well as colleagues in the Federal Reserve System and central bank community for their insightful comments and suggestions. Welcome to this year’s primary dealer meeting, and thank you for joining us today. Primary dealers play several important roles as trading counterparties of the New York Fed in its implementation of monetary policy, as participants in Treasury auctions, and as providers of information on market conditions to support the Desk’s monitoring of financial markets. 1 These annual meetings provide us an opportunity to strengthen this relationship and communicate our expectations for you. The official sector and market participants have a shared interest in ensuring that markets function efficiently, effectively, and fairly in the provision of financial services to all stakeholders, particularly firms and households. To help achieve these goals, the official sector employs a variety of channels, including legal, regulatory, and supervisory. In addition, officials work with market participants to create best practice guidance that complements official-sector initiatives.
In this context, global growth lost momentum somewhat in the third quarter. This was largely attributable to special factors, such as production losses in the German automotive industry and extreme weather events in Japan. Economic expansion in the US and China remained robust. Employment figures in the advanced economies rose again and unemployment continued to decline. The growth in international trade in goods also continued. In our baseline scenario for global economic developments, we anticipate solid growth in the coming quarters. In the short term, the world economy is set to continue to expand somewhat above potential, benefiting from the clear improvement in the labour market situation and the ongoing expansionary monetary policy in the advanced economies. However, a gradual slowdown is likely in the medium term. Nevertheless, we also see significant risks to this baseline scenario, primarily in connection with political uncertainties and protectionist tendencies. These risks have considerable potential for damage. The resulting uncertainty alone can curb growth and weaken the resilience of the global economy. For instance, surveys indicate that trade tensions have prompted companies to reassess their investment plans and value chains. As far as Brexit is concerned, uncertainty remains high following the postponement of the vote in the UK parliament. The tension surrounding Italy’s fiscal policy also persists. All these risks could lead to turbulence in the financial markets, jeopardise global economic growth, and also influence monetary policy.