Foreign exchange fixing revamp is imminent as regulators contemplate big changes
Sources familiar with the recently launched investigation by German regulatory watchdog BaFin are claiming that the investigation has been put on the top priority list and Deutsche Bank’s London offices will be visited by an investigating team. Transparency in major banks’ business practices has been a very important public issue ever since the German Government has distributed direct capital injections to the banking system back in 2008.
Additionally, last week HSBC and Citi have both suspended traders in relation to the ongoing 4pm FX fixing investigation. The move comes only days after Deutsche Bank has preemptively disposed of a trader that was involved in Argentinian Peso trading. With that in mind there are rumors circulating around the industry that there will be a major regulatory overhaul on how rates are actually being calculated.
With pricing of so many derivatives dependent on these tiny windows of trading activity and with companies getting furious to know how easy it has been for commercial banks to manipulate these rates, more scrutiny is guaranteed.
To put the whole picture into context for the industry, these daily announcements are not likely to end any time soon, however the bigger question is how the industry can revamp benchmark practices that affect the pricing of so many assets. One option has come up recently from US based forex technology company named Integral Solutions, we are sure many more are to follow.