The threat of more regulation is the biggest challenge facing FX at the moment. Recently, I was told by one senior figure that this is so worrying that the industry needs to form an association to lobby on its behalf.
I fully agree that the FX industry needs to seriously consider its image and fight off unnecessary change. If lobbying is good enough for the Association of Alternative Investment Managers – that’s hedge funds to you and me and which was recently reported to have hired a PR company for €1 million to argue its case with the EU about ill-thought-out legislation – then it’s good enough for the FX industry.
However, there is no need to form a new trade body because the FX industry already has one – it’s called the Association Cambiste International (ACI). I have written before why I think the ACI still has a role to play; as the threat of legislation looms larger, that role should have become clearer. The sad fact is that because of the neglect of the very same senior figures, the ACI has become a toothless tiger, unsure of its role.
At one time, young traders and brokers were compelled to join the ACI, not because of regulations but because many of the pioneers in FX realised that it was important to be part of a good network. Midland Bank, for instance, used to pay for its dealers to join the ACI and make them attend its meetings. The advent of electronic trading led to erroneous thinking that networking is unimportant.
ACI is a global body; in some countries, it remains very popular. In the UK, it was brought back from near extinction a few years ago, but has become little more than an organiser of cheese and wine parties. If that sounds harsh on its committee, it is not meant to be. Really I’m criticising the banks. ACI UK is still struggling because it has not got widespread support from the big players in the industry. Those very same banks that have failed to support the ACI are perhaps the ones most worried that there is no body to represent them now. They need to get behind the ACI to give it credibility, and the ACI needs to consider its role carefully.
There are also various committees that meet under the auspices of central banks, such as the UK’s Joint Standing Committee and the New York FX Committee. While these have done a fantastic job at instilling a level of professionalism in the FX market that does not exist in other markets – including those supposedly regulated, transparent and on exchange – they do not represent the wider industry the way the ACI could.