FX Supplement 2014 | Overview

Author: Gordon Platt


The benchmarking scandal in the FX market has shaken faith in the system of trading currencies that enabled a dozen or so major banks to allegedly manipulate the world’s largest market. The global investigations may be settled soon, but the damage to the market’s reputation could be lasting. Recognizing the need to restore a sense of fairness, transparency and liquidity to the global currency market makes changes inevitable. Many market participants have welcomed the Financial Stability Board’s recommendations for reform, particularly those relating to the 4 p.m. London fixing. James Kemp, managing director of the Global Foreign Exchange division of the Global Financial Markets Association, which represents many of the dealers in the market, says: “As the report highlights, there may well be challenges and costs in implementing the changes, but enhancing confidence in the market is crucial, and the industry will adapt to embrace these recommendations.”

If the industry does not act quickly to ensure appropriate behavior and implement the FSB report’s recommendations, the authorities may conclude that further regulatory reforms are necessary, the FSB has warned.

The Foreign Exchange Professionals Association (FXPA), a new Washington, DC–based trade association representing a wide range of interests in the FX market, was formed in September to provide advocacy for the industry. “This is a watershed moment for FX, as we redefine who we are as an industry and where we’re going,” says Derek Sammann, global head of commodity and options products at CME Group and vice chair of the FXPA. The group includes buyside institutions, exchanges, clearing houses, trading platforms, multilateral trading facilities, technology companies, banks and nonbank market participants.

In June, Thomson Reuters revised its FX trading rules and updated is Rule Book. “We want to make sure people are using the platform for its intended purposes—genuine commercial interest in trading—and ensure that’s the kind of liquidity we’re getting,” says Phil Weisberg, global head of FX at Thomson Reuters.