The FSB today published a progress report on implementation of its September 2014 recommendations for reforms to foreign exchange (FX) benchmarks. This report draws on assessments of market participants’ progress which were undertaken by the main foreign exchange committees as well as by central banks in other large FX centres. One of the principal aims of the recommendations of the FX benchmarks report was to reduce the incentive and opportunity for improper trading behaviour by market participants around the benchmark fixes. The implementation to date of the FSB’s recommendations, together with the enhanced scrutiny externally and within organisations on fixing transactions, appears to have moved the market in a favourable direction. The overall assessment of this report is that there has been good progress in implementing many of the recommendations; however, in some cases progress has been mixed. In particular, the report re-emphasises that the FSB recommendations are intended to apply to all FX benchmarks, not just the WM/Reuters (WMR) 4pm London fix. A more complete implementation of the recommendations, particularly regarding other FX benchmarks, would increase the likelihood of maintaining and extending the improvement already seen. Regulators and FX market participants must remain focussed on achieving such an outcome. Key points from the report: The report published today also includes an empirical analysis of the behaviour of the FX market around the London 4pm fixing window following WMR’s changes to the window in February 2015, and compares it to that prevailing before the changes which were described in the earlier report. A noteworthy development is the increased share of trading during the fixing window that uses algorithmic execution. The FSB will continue to monitor progress in this area, and work with authorities and industry bodies as needed to ensure continued enhancements to FX benchmarks and related activity. The preparation of this report was led by Guy Debelle (Assistant Governor, Financial Markets, Reserve Bank of Australia; Chair of the BIS Markets Committee). The preparation of this report was completely independent of the various conduct investigations into allegations of manipulation of foreign exchange markets being undertaken in different jurisdictions, and there was no access to the evidence that is being considered by the relevant authorities. The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.
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