This issue promises to be the largest of the three core topics for the FCA's investigation. The FCA intends to look at the competitive landscape among the institutions that offer financial and advisory services, especially in relation to how the services offered differ between large business and SME clients. There is a concern that SMEs may be offered less choice in services because of institutions' reluctance to engage more fully with businesses that will generate less revenue due to their smaller size.

Clients' buying behaviour will also be looked at from both a competition and a procurement law perspective, especially how demand-side requirements and preferences have an effect on the diversity of services offered by the relevant institutions. Examples of these requirements are an existing relationship with the client, an established reputation, and the bank's knowledge and experience of the client's sector or business.

The FCA accepts that there may be benefits that arise from the tendency of clients to use banks that they have an existing relationship with, and it therefore wishes to examine these further as well. The FCA has also expressed a desire to understand better the functioning of syndicates, and how the practice affects the competitive dynamics in the market.

The FCA will also look at the existing barriers to entry and expansion of a client base for these institutions. The FCA will employ a bottom-up approach by choosing to examine how banks and advisers establish a client base in the first place. It will then look at how the practices of incumbents may deter new entrants from creating a foothold in the market through reciprocal arrangements between the incumbents, but also how the barriers to entry may have been unreasonably raised by current regulatory or financial environment practices. The FCA will seek to understand how any existing barriers to entry may have affected the variety and quality of services being offered to clients.

The market study's terms of reference set out three sub-issues regarding limitations on transparency:

The availability and transparency of information is a key aspect of a successfully competitive market; without it, clients are unable to shop around for the best services and fees, and the risk increases of collusive practices between the incumbents, including monopoly pricing and the lowering of quality of the services offered. These issues can also occur when banks need to decide how to allocate debt or equity; without transparency, the likelihood of banks allocating them primarily to their preferred clients increases.

The FCA wishes to find out more about why bundling and cross-subsidisation practices occur, and whether they result in beneficial effects for the client, or whether they have unreasonably restrictive effects on competition instead.

The FCA will not investigate all of the issues raised in the wholesale market review in its market study. Omitted issues include best execution of client orders and barriers to entry in corporate banking. This is because ongoing regulatory changes are expected to have an effect on these issues, such as the implementation of the MiFID II Directive (2014/65/EU) (scheduled for 3 January 2017), the European Commission's development of a capital markets union, and the final report on the Fair and Effective Markets Review that was published on 10 June 2015 (see Briefing "MiFID II and MiFIR: preparing for change"; News brief "EU capital markets union: prospectus regime under review"; News brief "The Fair and Effective Markets Review: the results are in").

The FCA asked for comments on the issues raised in its terms of reference by 22 June 2015. This is in conjunction with its intentions to approach market participants and host roundtable and bilateral meetings with stakeholders as part of its information-gathering exercise.

In its final report, the FCA will state how it intends to follow up on the conclusions reached by the market study. It will be legally entitled to employ a number of remedies, including the option of choosing to do nothing. If the FCA concludes that there is a real need for it to take action to improve competitiveness in the market, the FCA may choose to employ market-wide remedies, such as changing or withdrawing rules, or firm-specific remedies, such as imposing financial penalties or cancelling permissions. In addition, the FCA may choose to make a reference to the Competition and Markets Authority, calling for a market investigation to be undertaken.