I teased a theme on Monday in the column regarding the oversight of FX businesses to which I want to return. If there is one recurring theme that I hear from talking to managers in the trading businesses, both voice and ‘e’, it is that not only do their compliance teams not understand the nuances of markets, they take up valuable time from people on the desk asking unnecessary questions and having basic themes explained to them. It’s just not an efficient model.
One of the reasons I enjoy our conferences so much is the capacity of the high quality speakers with whom we are fortunate to engage to raise a point that just makes you think, “why have we not done this before?”
This week we held our inaugural Frankfurt conference and during our Technology Futures session the discussion turned to the role of technology in making markets safer. It was one of those great sessions where I turned up to moderate armed with a bunch of themes and questions following (ahem) “extensive research” and got to ask one of them!
Does a magic genie do the work of developing the next generation? No, it’s people like you and me and I think it is about time that the industry – and especially the major institutions and other employers – recognise that. Because without the volunteer network – people willing to give up their time to help develop the next generation of industry participants – FX loses its community spirit and that surely has to lead to greater regulation – something few, if any, of us want.
The foreign exchange industry has always prided itself on its ability to innovate and evolve and it does indeed have a positive story to tell in these areas, but one area in which it clearly fell down badly was in its inability to maintain control in an era of technological expansion.
It is hard to look back on the events of 2008-13 and not see them as a direct result of the oversight function either failing to understand, or failing to keep up with, the technological revolution.
The Australian Securities and Investments Commission (ASIC) has released a report to coincide with the FX Global Code of Conduct which seeks to redress shortcomings in behaviour as well as to outline good practice on spot FX desks in the Australian market.
The report, which was compiled following an investigation into local banks’ practices and led to fines against the top five Australian banks, says, “We observed a lack of appropriate training and guidance, particularly in relation to handling confidential information, considering client interests and conflicts of interest, and executing stop loss and fix orders. Training sessions were rarely specific or tailored to the role of employees operating in the spot FX market. We also observed that employees frequently engaged in practices which were learned from their peers without question or challenge.”