Troubled FX industry set to defend 'self regulation'
The ACI, the main umbrella group for dealers in the world's single biggest financial market, holds its annual world congress at a time of turmoil for the industry, hit by the dismissal or suspension of more than two dozen of its leading lights.
In the highly fragmented, $5 trillion a day market, it is one of the few forums for senior bankers and brokers to discuss a concerted response to the row, which centers around claims that top dealers colluded to move benchmark exchange rates.
The ACI believes it and its Model Code of conduct for dealers - already used by many major institutions - can play a central role in the industry's efforts to take action of its own before regulators begin to get their teeth into the issue.
"The banks' main concern here is that it will provoke a stiff reaction from regulators that says everything in this market will have to change along the same lines as the changes we have seen on credit and equities markets," said one banker dealing with currency issues, who asked not to be named.
"They are thinking about what can be done to avoid that."
Senior bank managers and other officials will meet behind closed doors on Wednesday and Thursday before a series of more public discussions on Friday.
David Woolcock, an executive with IT company Eurobase who heads the ACI's guiding committee on professionalism and is vice-head of its forex equivalent, says his group will discuss fixings. A public panel on Friday should also touch on the issue, but it is not included anywhere on the main agenda.
That is some reflection of the general nervousness in the industry, where many practitioners fear they or associates may soon be involved in potentially career-ending legal cases.
It has already prompted a shake-up at the top of the Bank of England, and carries the risk of billions of dollars more in fines for banks to follow the more than $6 billion already handed out in the Libor interest rate-fixing row.
In response to the perceived role of complicated derivatives in fuelling the financial crisis, regulators have sought to push as much of that market's trading as possible onto exchanges, which are seen as offering more transparency.
Most participants in the more straightforward cash foreign exchange market say it is too big, competitive and fragmented for similar moves. They already have reservations about the implementation of 2010's U.S. Dodd-Frank law overhauling Wall Street and European equivalents, and say any more aggressive push by regulators will push up costs for all.
One session at the Congress will carry the sub-heading "How to keep the self-regulated market alive?". A report by financial consultancy Adsatis for the ACI showed many asset and fund managers felt reforms had been pushed through too fast.
"Many questioned the need or desirability of imposing the main strictures on a relatively transparent market with little obvious systemic risk," the report said.
A raft of other participants in the market, from State Street, which oversees the running of the biggest fixings, to the EBS platform where most euros and dollars are traded, are working on options to make the daily fixings themselves more transparent.
The ACI itself looks set to appoint former State Street (STT.N) executive Marshall Bailey as its first full-time president, succeeding what have traditionally been senior industry executives taking on an additional role.
"Attendance at the international congress has been falling over the past 20 years but it has begun to go back up," said Woolcock. "If you ask me, that is because we have become more relevant.
"For us the best way forward is stronger commitment to industry codes of conduct and a more robust approach from authorities to criminal wrongdoing. This is an industry that should remain self-regulating."
In the highly fragmented, $5 trillion a day market, it is one of the few forums for senior bankers and brokers to discuss a concerted response to the row, which centers around claims that top dealers colluded to move benchmark exchange rates.
The ACI believes it and its Model Code of conduct for dealers - already used by many major institutions - can play a central role in the industry's efforts to take action of its own before regulators begin to get their teeth into the issue.
"The banks' main concern here is that it will provoke a stiff reaction from regulators that says everything in this market will have to change along the same lines as the changes we have seen on credit and equities markets," said one banker dealing with currency issues, who asked not to be named.
"They are thinking about what can be done to avoid that."
Senior bank managers and other officials will meet behind closed doors on Wednesday and Thursday before a series of more public discussions on Friday.
David Woolcock, an executive with IT company Eurobase who heads the ACI's guiding committee on professionalism and is vice-head of its forex equivalent, says his group will discuss fixings. A public panel on Friday should also touch on the issue, but it is not included anywhere on the main agenda.
That is some reflection of the general nervousness in the industry, where many practitioners fear they or associates may soon be involved in potentially career-ending legal cases.
It has already prompted a shake-up at the top of the Bank of England, and carries the risk of billions of dollars more in fines for banks to follow the more than $6 billion already handed out in the Libor interest rate-fixing row.
In response to the perceived role of complicated derivatives in fuelling the financial crisis, regulators have sought to push as much of that market's trading as possible onto exchanges, which are seen as offering more transparency.
Most participants in the more straightforward cash foreign exchange market say it is too big, competitive and fragmented for similar moves. They already have reservations about the implementation of 2010's U.S. Dodd-Frank law overhauling Wall Street and European equivalents, and say any more aggressive push by regulators will push up costs for all.
One session at the Congress will carry the sub-heading "How to keep the self-regulated market alive?". A report by financial consultancy Adsatis for the ACI showed many asset and fund managers felt reforms had been pushed through too fast.
"Many questioned the need or desirability of imposing the main strictures on a relatively transparent market with little obvious systemic risk," the report said.
A raft of other participants in the market, from State Street, which oversees the running of the biggest fixings, to the EBS platform where most euros and dollars are traded, are working on options to make the daily fixings themselves more transparent.
The ACI itself looks set to appoint former State Street (STT.N) executive Marshall Bailey as its first full-time president, succeeding what have traditionally been senior industry executives taking on an additional role.
"Attendance at the international congress has been falling over the past 20 years but it has begun to go back up," said Woolcock. "If you ask me, that is because we have become more relevant.
"For us the best way forward is stronger commitment to industry codes of conduct and a more robust approach from authorities to criminal wrongdoing. This is an industry that should remain self-regulating."
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