Market Abuse Crackdown Could Come for $2 Trillion FX Trades

(Bloomberg) -- Regulators have the foreign exchange market back in their sights after recently imposing fines for manipulating prices.

The European Union’s market watchdog may extend the region’s rules against market abuse to cover spot currency trades, it said on Thursday. So far spot trades, a $2 trillion slice of the daily FX market according to the Bank for International Settlements, have been exempt from many EU rules and covered instead by voluntary industry codes of conduct.

The European Securities and Markets Authority said recent multi billion-dollar sanctions against banks for rigging currency benchmarks, as well as the sheer size of the market, could justify expanding its reach. Still, ESMA said oversight would be tough and costly both for regulators and the industry, and it wants feedback on whether the move makes sense.

“This would be a material regulatory development and also leads the way towards spot FX being treated as a regulated product in other areas,” said Jake Green, partner at Ashurst law firm in London.

While the U.S. has won guilty pleas from four banks -- JPMorgan Chase & Co., Citigroup Inc., Royal Bank of Scotland Group Plc and Barclays Plc -- none of the individuals at the heart of the currency-rigging conduct has been found responsible. The banks have agreed to pay billions of dollars in fines.

To contact the reporter on this story: Silla Brush in London at sbrush@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers

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