Business Insider:
The Financial Conduct Authority (FCA) warns in a letter published on its website on Tuesday that finance firms borrowing money from peer-to-peer lenders to fund their own lending activities could be breaking the law.The problem arises if the finance firm borrowing the money doesn't have a licence to take deposits, as the borrowing of money from the peer-to-peer platform to fund lending technically counts as taking a deposit. The FCA's director of supervision Jonathan Davidson, who authored the letter, says such activity "may be a criminal offence."
While the finance firm itself is the one that is technically in breach of the law, the FCA has written to the online lending platforms as they are the ones facilitating the problem. The FCA says that any platform that allows finance firms without deposit licences to borrow money "would not be acting in a manner consistent with our expectations for regulated firms and may be in breach of certain regulatory requirements."The lending platform, under current technology, does not use standard S&L technology, so they cannot be breaking law. But financial firms use the platform to borrow money from implicit depositor elsewhere. We endup with a conflict. Deposits at traditional regulated banks have restrictions on loan to deposit ratios. The on line platform allows financial firms to get those deposits and skirt the regulations.
This is a crossing the boundary regulation, going from making odds to predicting the movement of mass over time and distance. Redneck Trading systems skirt the regulation, or more appropriately, they let the traders decide the regulation and incorporate it into the bit error function. It is automated price compression after all, and the bit error functin is a defined, betable random process.
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