Banks, funds agree on wider window for FX fix


Reuters is reporting that responses from more than 30 asset managers, banks and industry associations published by global regulators on Wednesday included a wide range of opinions on the 15 proposals laid out by the Financial Stability Board last month.

There was broad agreement on the key point that they should pay more to banks for “fixing” services, in order to remove one of the key tensions in the existing system.

But on the issue of by how much to widen the window, firms’ recommendations varied from an extra minute to extending the period to as much as half an hour.

One high-level banking source told Reuters separately that, in discussions in recent weeks, larger banks and clients had called for a much wider window but that many smaller players had been concerned about the scale of the risk this would generate, dividing opinion.

The London-based Investment Management Association, which represents UK asset managers who oversee around $10 trillion in investments, was one of those calling for a longer 20-30 minute window.

“A wider window may make it easier to accommodate a broad range of orders in large aggregate size, which is itself a desirable objective,” regulatory affairs advisers Arjun Singh-Muchelle and Adrian Hood said in the response.

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The $5.3 trillion-a-day foreign exchange market is the world’s largest financial market and currently being investigated for collusion.

At the center of the investigations is activity around the WM/Reuters currency fix at 4 pm local time in London, a 60-second window at which major exchange rates are set. These prices are used as reference rates for trillions of dollars of investment and trade globally.

In one response published by the FSB, DV Capital LLC’s Gaurav Chakravorty attacked the industry as “deteriorating for real money participants” and “fleecing” some participants.

While regulators have shown little appetite for any wholesale shift of trading to some form of fully-regulated exchange-based system, the FSB did raise the prospect of creating a new independent utility to isolate and deal with all fixing orders.

A number of industry players have already questioned whether such a system would work, be cost-effective, or deal effectively with the currency risk around fixings, and the responses were largely skeptical to the idea.

“While a central utility would full maximize netting opportunities, we have concerns about the feasibility of creating a central, global utility,” Deutsche Bank, the world’s second bigger currency trader, said in its response.

The WM/Reuters fix is compiled using data from Thomson Reuters and other providers, which is calculated by WM, a unit of State Street. The FSB will present its final plans to reform the Forex market to G20 leaders at a summit in November which will be held in Brisbane, Australia.

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Banks, funds agree on wider window for FX fix

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