Simon Potter, head of market operations at the New York Fed, gave a speech today at a private conference showing that regulators around the world are still frustrated with the behaviors of the major FX banks with regards to price manipulation.
He called on participant to step up and help regulators in order to restore public trust in the FX market after worldwide investigations and massive fines devastated its credibility. Additionally Potter, thinks a more coordinated regulatory framework is needed, “Further work is required both to strengthen best practices at a global level and to promote greater adherence to those practices.”
Just this year, six of the biggest banks in the world were fined a total of about $5.6 billion in settlements and four of the major banks also pleaded guilty for attempting to manipulate global FX rates at the expense of their clients and all other market participants.
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For a period of three years, in chat groups with names such as ”The Cartel” and “The Bandits’ Club,” bank traders shared information with competitors allowing them to execute their own trades before filling client orders.
“Market participants have either not been aware of existing best practices guidance or have made the conscious decision to violate such guidance in the hopes of making a short-term gain. The behaviors that triggered these criminal and regulatory actions illustrate that, for many, self-interest and the lure of near-term gains were put above the preservation of the market’s integrity and long-term sustainability,” the top official said today.
Potter also commented on the recently controversial practice of high-frequency trading (HFT), and said HFT raises questions over fairness, liquidity, and quality of FX prices.