March 24th 2005
Britain calls for regulation of currency markets
A British regulatory agency recently announced its belief that global currency markets should be regulated. Equity and debt markets are already heavily regulated, so why not currency markets, in which $2 trillion+ worth of currencies are exchanged every day. The regulatory agency’s main suggestion was to separate analysts and traders, similar to what has been done in banks’ debt and equity departments. There is a clear conflict of interest, or ability to manipulate currency markets, when analysts and traders collude. If a bank’s analysts advise the bank’s clients on the direction it believes a particular currency to be headed, that bank’s traders could profit from the information. The analogy to equity markets is self-evident. The problem is one of jurisdiction and boundaries. Capital markets are regulated by an agency within the nation that the capital is invested in. Currencies, on the other hand, are often traded by parties outside of the currency’s home country. Scotsman.com reports:
THE Forex market’s argument is that practitioner regulation, or self-regulation, is a better tool in fighting tricks of the trade and loophole hunting, rather than forced compliance with a one-size-fits-all rule.
Read More: Banking on a regulated market for currencies