WARSAW/LONDON Aug 20 Banks and asset managers
are ready to support an extension of the one-minute window used
to set currency market benchmarks, documents showed on
Wednesday, but most are concerned by the risks involved and
divided on how much of an extension.
Responses from more than 30 asset managers, banks and
industry associations published by global regulators on
Wednesday included a wide range of opinions on the 15 proposals
laid out by the Financial Stability Board last month.
There was broad agreement on the key point that they should
pay more to banks for "fixing" services, in order to remove one
of the key tensions in the existing system.
But on the issue of by how much to widen the window, firms'
recommendations varied from an extra minute to extending the
period to as much as half an hour.
One high-level banking source told Reuters separately that,
in discussions in recent weeks, larger banks and clients had
called for a much wider window but that many smaller players had
been concerned about the scale of the risk this would generate,
The London-based Investment Management Association, which
represents UK asset managers who oversee around $10 trillion in
investments, was one of those calling for a longer 20-30 minute
"A wider window may make it easier to accommodate a broad
range of orders in large aggregate size, which is itself a
desirable objective," regulatory affairs advisers Arjun
Singh-Muchelle and Adrian Hood said in the response.
The $5.3 trillion-a-day foreign exchange market is the
world's largest financial market and currently being
investigated for collusion.
At the centre of the investigations is activity around the
WM/Reuters currency fix at 4 pm local time in London, a
60-second window at which major exchange rates are set. These
prices are used as reference rates for trillions of dollars of
investment and trade globally.
In one response published by the FSB, DV Capital LLC's
Gaurav Chakravorty attacked the industry as "deteriorating for
real money participants" and "fleecing" some participants.
While regulators have shown little appetite for any
wholesale shift of trading to some form of fully-regulated
exchange-based system, the FSB did raise the prospect of
creating a new independent utility to isolate and deal with all
A number of industry players have already questioned
whether such a system would work, be cost-effective, or deal
effectively with the currency risk around fixings, and the
responses were largely sceptical to the idea.
"While a central utility would full maximise netting
opportunities, we have concerns about the feasibility of
creating a central, global utility," Deutsche Bank, the world's
second bigger currency trader, said in its response.
The WM/Reuters fix is compiled using data from Thomson
Reuters and other providers, which is calculated by WM,
a unit of State Street Corp.
The FSB will present its final plans to reform the forex
market to G20 leaders at a summit in November.
(Editing by Jeremy Gaunt)