The US Federal Reserve Board has announced that it will seek a $1.2 million fine and a permanent ban on employment in the banking industry for Chris Ashton, a former FX trader at Barclays.
In recent years the sell side has justifiably been criticised for its behaviour in the FX market. But should regulators and market participants be taking a closer look at how the buy side operates in this market? Galen Stops reports.
The FX industry has been rocked by a number of scandals in recent years and in many cases the implications of these scandals is only now coming home to roost.
Two of the largest custodian banks in the world, BNY Mellon and State Street, have agreed $714 million and $530 million settlements, respectively, related to allegations they systematically set disadvantageous rates for their customers in contrast to their claims to be achieving best execution for them.
The US Commodity Futures Trading Commission (CFTC) has closed its investigation into Deutsche Bank’s FX business, the bank revealed in its Q3 results today.
In May 2015, a number of major banks were fined more than $5.8 billion for practices relating to alleged collusion and manipulation of the spot FX market around the 4pm London Fix, by a number of regulatory authorities, including the CFTC.
Deutsche was not one of the firms named in those settlements, but remained under investigation by the CFTC for its FX market practices.
Alex Dunegan, founder and CEO of Lumint, talks to Profit & Loss deputy editor, Galen Stops, about the challenges facing the buy side around selecting and evaluating benchmarks.
The WMR benchmark has come under severe scrutiny since the allegations that banks colluded to manipulate it, leading to changes in the way that the benchmark is calculated and questions from buy side firms about whether they should be using it at all.
Dunegan claims that this is a “critical” question, and provides his take on the answer.
In a new whitepaper issued today, Thomson Reuters claims that regulators are requiring firms that contribute to financial benchmarks to face increased scrutiny of their record-keeping and information governance policies.
The paper, “Information Governance Reform for Benchmark Submitters”, focuses on the global momentum for regulatory change following the Libor and FX benchmark scandals and examines the challenges submitters now face.
It notes that, because most benchmarks are global and therefore cross jurisdictions, individual benchmarks may have multiple sources of regional regulations. As a result, firms are now required to ensure compliance with an expanded scope of guidelines and relevant jurisdictions.
Benchmark fixes have been immersed in controversy for the past five years, but anecdotal evidence sees no shift in asset manager attitudes to them. Colin Lambert asks, will these firms ever desert the Fix?
If there has been one lightning rod for controversy in what has been a pretty turbulent period for the foreign exchange industry it has been benchmark fixes. Banks have been fined, traders and managers have been dismissed, and some are facing legal sanctions, including jail, thanks to various activities all of which were centred on the WM and European Central Bank fixes.
I absolutely get the value in data – more importantly, I absolutely get the potential for data in our markets. However (and who didn't know that was coming?) it should not become the only driver of analysis. This week's research paper on the 4pm Benchmark Fix does a great job of empirically analysing the changes and their impact on the mechanism, but, to my mind, fails to take into account how the changes corrected an existing imbalance that needed redressing for the overall wellbeing of the market.