Banks have criticised an attempt to reform the $5.3 trillion-a-day foreign exchange market by creating a central platform, saying that it is impractical. Trade body ACI The Financial Markets Association said in its submission to the Financial Stability Board (FSB) that such a platform would create “enormous single point-of-failure risks”, reported the Financial Times [subscription may be required].
The proposals were drafted to address the problem of alleged manipulation in the ‘4pm fix’. The FSB said in July that a “utility” to match fixing orders would undercut the banks’ role in the daily fix which is currently set by averaging market-makers’ order prices.
The Financial Times said that other firms, such as State Street and an ICAP-EBS partnership, were setting up their own forex matching and execution platforms, but that these business models “would be threatened by the creation of a centralised global market infrastructure”.
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