Members of the Foreign Exchange Professionals Association (FXPA) spent two days in Washington DC last month meeting with senior members of the Federal Reserve, US Treasury and Commodity Futures Trading Commission (CFTC), as well as held a series of educational briefings for Congressional staffers on such key committees as the House Financial Services Committee, both the House and Senate Agriculture Committees, and the Senate Banking Committee.

The FXPA was well received by policymakers as a resource for diverse perspectives on an array of topics, as well as to provide educational background and views around issues of interest. Key discussions took place around such topics as the Fair and Effective Markets Review (FEMR) and the potential for a global code of conduct for FX markets; market conditions and trends around liquidity and volatility; the role of the FX market for end users to hedge currency risk; and global regulatory harmonization.
Staff from the House Financial Services Committee were interested in learning more about the FX market, particularly as it relates to global financial stability and the ability for market participants to rely on competitive, transparent marketplaces. Questions also focused on issues to do with sufficient pre-trade price transparency, market participant conduct and a need for global regulatory coordination.
At the House Agriculture Committee, FXPA members led an overview of FX markets, explaining the basics of the global market and how market participants hedge currency risk. Questions were asked around the differences between OTC and exchange traded components of FX markets, particularly because the Ag Committee recently completed work on swaps and futures in the Commodity Exchange Act reauthorization.
FXPA participants provided a primer on the FX market to the Senate Agriculture Committee, and addressed questions around end-user concerns. FXPA members explained, for illustrative purposes, how Apple and John Deere might each face currency risk and seek to mitigate that risk through the FX market.
Meanwhile, at the Senate Banking Committee meetings, the discussion primarily focused on ways to improve FX markets, with FXPA emphasizing the need for a “balanced approach” to any regulation of the marketplace.
At the Federal Reserve, FXPA met with Governor Lael Brainard and discussed how liquidity conditions can be affected by regulation and what impact this can have on end users. Volatility proved to be a topic of great interest, particularly around the Swiss National Bank’s (SNB) decision to remove the exchange rate floor in January, and how that has impacted credit, in terms of both cost and access. Given the Governor’s interest in access to credit, there was also in-depth discussion around the evolving nature of the “prime-of-prime” model.
At the Fed’s Finance Division, members met with a team that was interested in hearing views from the breadth of FXPA’s diverse membership on a variety of topics ranging from NDF clearing to benchmark reform and the SNB’s recent actions.
During a meeting at the Department of the Treasury, staff focused on gathering market “intelligence” and hearing about commercial conditions in the FX market. Questions were asked about “pauses” in liquidity, a lack of liquidity providers, and the impact on liquidity from the SNB move. Treasury staff noted the biggest obstacle to developing appropriate regulations for the FX markets is a lack of coordination, both domestically and across jurisdictions. FXPA members explained how the FX market is taking some proactive risk reducing steps around some “fixed” currency pairs, and discussed market structure and the impact of credit in light of prime broker repricing.
FXPA also met with three CFTC commissioners, including Chairman Timothy Massad, J. Christopher Giancarlo and Mark Wetjen. Discussions generally focused on such issues as the nature of liquidity, the influx of swap data to the CFTC and the feasibility of regulators to access similar transaction data for OTC spot trading. Also under discussion was coordination with global regulatory counterparts and regulatory harmonization across jurisdictions. FXPA was also asked for opinions on a global code of conduct, as well as about the liquidity implications stemming from the requirement that certain FX products, such as NDFs, are traded on SEFs.
Throughout the two days, FXPA members also discussed the Association’s mission to represent the collective interests of professional FX industry participants to advance a sound, liquid, transparent and competitive global currency market through education, research and advocacy.
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