The Financial Services Authority is to make investment banks record and store their traders' mobile phone calls, despite industry opposition over costs.
The FSA already has the power to tap traders' landline conversations, but the issue of banks doing the same and storing the recordings has been long debated.
Investment banks say recording and storing mobile calls will cost them too much money a year, but the FSA says the recording of calls is essential to prevent insider dealing and other market abuses.
The investment banks will have to start recording the calls from next November.
Firms will record and store the calls for a period of six months. The rule will cover all "relevant conversations" on company-issued phones, the FSA said. The banks will also have to take "reasonable steps" to prevent relevant business conversations taking place on private devices.
The FSA estimates its demand will cost the investment banking industry £11 million in one-off installation costs, with annual operating costs of £18 million in addition.
The FSA says its demands are compliant with both EU and international privacy laws.