Currency Regulation Risks Rupture, Diversion of Trade, CME Says

The introduction of new rules governing U.S. and European currency trading needs to be coordinated to avoid a fragmentation of the market, according to CME Group Inc., owner of the world’s biggest futures exchange.

“Nobody wants to see a regulatory regime that starts to bifurcate and create reasons, and maybe not natural reasons, to put business on less-regulated shores,” Derek Sammann, senior managing director of financial products and services at CME Group, said in a panel discussion at the Bloomberg FX Debate in London. “That conversation is critical.”

Risking a divergence of global markets is “quite dangerous” as it may restrict economic expansion “at a time when the world needs growth and stimulus,” Gavin Wells, the head of LCH.Clearnet Ltd.’s ForexClear unit said at the event.

There’s also a possibility it will catalyze the industry’s growth in the Asia-Pacific region, he said.

“If you track the regional growth of foreign exchange it’s moving from west to east,” Wells said. “The regulators and market participants, while seeking to do what is right for their own region initially will also be looking at unintended consequences to see what happens globally.”

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