FX Benchmark Overhaul 

Global regulators published details of their plans to overhaul foreign-exchange benchmarks in response to allegations that traders colluded to manipulate rates in the $5.3 trillion-a-day currency market.

The Financial Stability Board proposed changes to the way the WM/Reuters rates are calculated, including extending the length of the one-minute windows on which the benchmark is based, and making firms set up systems to address potential conflicts of interest with their clients. The Basel-based FSB set an Aug. 12 deadline for comments on the plan.

At least a dozen regulators on three continents are investigating whether traders in the world’s largest financial market colluded with counterparts at other firms to manipulate benchmarks such as WM/Reuters rates, which are used by money managers and pension funds to determine what they pay for foreign currency. More than 20 traders have been fired or suspended across the industry.

The FSB, led by Mark Carney, governor of the Bank of England, is also analyzing whether there’s a need for “alternative benchmark calculations” prepared over longer time periods of as much as 24 hours, according to a statement posted yesterday on the group’s website.

The FSB consists of regulators and central bankers from around the world that seek to agree on global financial rules. The board set up a task force on financial benchmarks after attempts to manipulate the London interbank offered rate. It said in February that it would extend this work into currency-market benchmarks.

The proposals are among 15 recommendations put forward by the group to transform rate-setting and bolster safeguards against manipulation.

 

Source: bloomberg

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