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Screenshot of a breaking news alert e-mail from Q2 2017
Leading Forex ECN wants to combat FX market manipulation, such as price ‘flashing’
We learned today in a press release that Thomson Reuters Matching, the leading anonymous electronic matching service for the FX market is proposing changes to it’s Matching Rule Book. The changes will apply to both Thomson Reuters institutional FX platforms, FXall and Thomson Reuters Matching. It is important to note that these proposals are not related to current probes into FX rigging between banks and traders.
The changes seek to strike a balance between efficiency and fair market play. The end goal of their 12 month long consultation and analysis of the platform is to “reflect a higher standard for acceptable trading behaviours in foreign exchange.” The new proposed rules are geared towards sustaining primary markets and combating abuse.
A few of the key goals of the new proposed Matching Rule Book:
- Encouraging genuine interest at the top of the book
- Maintaining high certainty of execution and providing a fair and orderly trading experience for all market participants
- Discourage abuse, manipulation or disorderly conduct and activity that does not truly enhance liquidity for the market as a whole
- Randomisation of order processing pilot, to be run in a selected currency pair, to randomise execution and further facilitate a more equitable trading environment
Currently, there are certain safe guards to deflect abuse from HFT and toxic order flows, they include “Minimum Quote Life that ensures longevity of orders in the book and gives counterparties a fair chance of trading those orders, and Minimum Tick Size that helps achieve the right balance between tight spreads and stability of prices.” This is all part of recent trends to provide more fairness and honesty to trading clients. Rival EBS took similar steps in the last year and implemented a larger minimum tick size, batching and order randomization to combat complaints by big bank clientele that they were being taken advantage of on the platform by high frequency traders.
To facilitate a more equitable trading environment and keep tabs on market participants, Reuters also proposed including surveillance and reporting of client trading activity, client notification of activity that unless changed can lead to penalties. Phil Weisberg, Global head of FX, Thomson Reuters states: “We take our responsibility to maintain a fair and orderly trading experience for all Spot Matching market participants very seriously and are adopting a leadership position in defining a higher standard for acceptable trading behaviours in FX.”
In light of the recent probes into some major FX rigging, this is welcome news from a major player in the institutional FX world to further increase confidence and fair play that ensure higher standards in FX trading.