Friday 6th June, 2014

New regulations in the foreign exchange market could come into place in the next couple of weeks following plans to clean up the market by Chancellor George Osborne and the international Financial Stability Board (FSB). The forex industry is largely unregulated and left in the hands of bank traders who execute deals on behalf of global organisations. A large number of the deals move through London.

Regulators around the world, including the Financial Conduct Authority (FCA) in London and the US Department of Justice are investigating allegations of forex manipulation. At least 15 banks are thought to be involved and it's been reported that 9 have suspended or fired traders. Currently none of the allegations have been proved.

Options open to the Chancellor include ensuring that a broader selection of trades are included in setting the price of forex deals, making the trading transparent on electronic trading platforms, limiting the negotiations between traders before the prices are set and challenging the trading culture with a new professional code of conduct. The single "fix" at 4pm could also be changed.

The Chancellor is very much aware that continuing allegations of manipulation around forex are likely to further undermine public trust in an already embattled sector.

In his recent speach, Inclusive Capitalism, Bank of England Governor, Mark Carney said "In recent years, a host of scandals in fixed income, currency and commodity markets have been exposed. Merely prosecuting the guilty to the full extent of the law will not be sufficient to address the issues raised. Authorities and market participants must also act to re-create fair and effective markets."