LONDON May 9 Governments should not leap into
full-scale regulation of currency trading in the wake of claims
leading banks rigged market benchmarks, a member of the UK
parliament committee overseeing the financial sector said on
Banks and other institutional players in the foreign
exchange industry are watching global regulators nervously for
signs of any appetite for a shake up of what to date has been
the world's biggest self-regulated financial market.
They say putting currency trading on the sort of exchanges
used for shares, derivatives and other globally-traded assets,
or simply regulating it more heavily, would only drive up costs
in a market which has grown steadily more efficient for business
over the past decade.
Andy Love, a member of the British parliament's Treasury
Select Committee, said that as long as the industry took steps
itself to reform the issues around "fixing" benchmarks and
possible collusion at the centre of the scandal, there should be
no rush to regulate the market heavily.
"I think only in the circumstances where it was felt that
the damage to public confidence was so great and the response of
the industry so limited, would it be felt that regulation was
warranted," Love said.
No plans for regulating the forex market have been put
forward so far in Europe but any settlements by banks for
manipulating forex benchmarks would almost certainly trigger
steps to change that piece of the market, as it did when lenders
were fined for rigging the Libor benchmark interest rates.
Momentum for new rules could build when the European Union
resumes work in the autumn on a law to regulate benchmarks, and
the G20's Financial Stability Board reports in coming months on
Libor and forex markets.
But the head of Britain's Financial Conduct Authority (FCA),
Martin Wheatley, said last year that it would be a big step for
regulators to decide that forex needed to be a formally
"If its necessary in order to have the trust and confidnece
for the market place to be regulated then so be it," Love said.
"But I think we need to wait and see how the industry
responds and how deep the forex scandal goes before we decide if
a regulatory response is the appropriate one."
(Reporting by Patrick Graham and Huw Jones; Editing by Toby