The Foreign Exchange Professionals Association (FXPA) has warned that now is a critical time for the FX industry to enhance its engagement with regulators.
Representatives of the Foreign Exchange Professionals Association (FXPA), which announced its launch at Profit & Loss’ Forex Network Chicago event on September 25, stressed the importance of the industry being represented by one voice to regulatory bodies around the globe.
“I think that the real threat for the FX market is that time is short and it’s clear that the regulations will be introduced soon. In order to be able to inform those finalising the regulations, we need to have established one voice as an industry. This will ensure that any impact of the regulations is fully understood before implementation,” said Gavin Wells, global head, ForexClear, LCH Clearnet, and an FXPA board member.
Chris Concannon, president and COO of Virtu Financial, also a board member, stressed that currently, some regulators are learning about the FX market in the context of the recent accusations around market manipulation and that this could negatively impact their understanding of this global market place.
“Right now, regulators are not learning about this space by coming in and understanding how it works, they’re being educated by enforcement cases. This is the worst possible education for a regulator.
“As a broad and diverse industry body we can speak to the regulators about how the market works, the benefits that it provides to end users and where there are areas that we can improve. That’s a much better dialogue,” he said.
Craig Messinger, global head of trading and risk at BNY Mellon, and FXPA’s treasurer, stressed that the diverse membership of the FXPA means that it is uniquely placed to help educate regulators about the market.
“Traditionally, a lot of trade associations were started by the primary market makers in the industry they represent. Very quickly we realised that this might be the only association that has vendors, exchanges, clearers, buy side, sell side and alternative market makers on board.
“If you think about how the market has evolved, every one of those constituents is having a dramatic impact on innovation and the future of this market. So my message to all segments of the FX market is: join this organisation, because you will have a voice,” he said.
The panel admitted that when the idea behind the creation of FXPA was first considered, they were concerned that the diverse nature of the association could make it difficult to build a consensus.
“We’ve had that conversation and we know that we’re not all going to agree on everything. But so far I think that there has been a relatively narrow voice representing the broad interests of the most diverse underlying asset class. What we are trying to provide is industry advocacy rather than institutional advocacy,” said Derek Sammann, senior managing director, global head of commodities and options products at the CME, and FXPA’s vice chair.
The panelists agreed that once they began engaging their counterparts in a dialogue, they realised that there were numerous areas of common ground where they could promote issues for the benefit of the FX industry as a whole.
The panellists reiterated that both the buy side and the sell side have to work together to make the market work. “One voice doesn’t mean one opinion, and that’s what this group is here to discuss,” the panellists agreed.
The panel closed by explaining that the FXPA needs to be a global organisation in order to reflect the global nature of the market that it is representing. Mark Sandomeno, manager, emerging market derivatives at GFI Group and FXPA board member, stressed the importance of this global approach.
“When you enter into an FX trade you’re automatically thrust into two sovereign and regulatory jurisdictions and so there needs to be a global dialogue. Right now, substituted compliance is a dangerous issue, because in the US we’re rushing towards deadlines, but there’s nothing to substitute the rules with yet. We have to be mindful that this is a global issue,” he said.