2014: a year in data – FX
A fine time for the top 10
From the start of the year, everyone knew that big fines were heading for the foreign exchange houses. In November, the first round of fines finally came through. In the middle of all that, in May Euromoney published its annual benchmark survey of the industry. Everyone expected the fines to be based on the relative size of a business. As our chart demonstrates, that wasn’t the case. It was rather lost in the furore that after nine years at the top, Deutsche Bank lost the overall market share ranking to Citi.
Citi takes top spot for first time since 2002
Deutsche Bank misses out on achieving 10thconsecutive year at top of survey by narrow margin
RBS and Credit Suisse suffer big falls in volume and ranking
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Investigations into allegations of market fixing in foreign exchange are spreading into the very heart of the business. Those running the world’s biggest FX houses live in fear of what analysis of hundreds of millions of calls and emails will unearth. Do investigators and regulators risk bringing down the axe on a market that has always provided unrivalled liquidity and ultra-tight pricing for clients?
The FX market came under intense scrutiny in 2014. Regulators handed out huge fines as flagrant rule-breaking around the 4pm London fix for the purpose of boosting the profits of individual traders became apparent.
Back in May, as the extent of the abuses became apparent, Euromoney asked market participants how they would replace the WM/Reuters fix.
There was no consensus. More said they were happy to keep the existing fix than any other option.
Since then, a number of proposals have been made to change the way the market works. The most revolutionary is the idea of introducing a central clearing utility through which all FX trades should be cleared. No one was suggesting that back in May, according to our survey.
As Thomson Reuters announces a revision to foreign-exchange trading rules, data from the Euromoney FX Survey 2014 reveal the majority of respondents want to see the joint WM Company and Thomson Reuters fix remain as the benchmark.
As the FX regulatory landscape gets revamped, data from the Euromoney FX Survey 2014 shed light on what the market wants when it comes to benchmark reform, including its views on sticking with the current WM Company and Thomson Reuters fix.
The debate around how to strengthen the regulation of FX markets continues to rage. Advocates highlight examples of regulations that have benefited the markets in the long run, while detractors warn of unintended consequences and cite their own examples of risk-mitigating measures evolving naturally within the industry.
The market tremors from the FX-fixing scandal and subsequent probe – triggering a flurry of fines, litigation cases and prosecutions – is set to reverberate for years to come. Euromoney investigates the fallout for global banks and possible reforms.