Currency Dealers Withhold Trading Ideas Amid Regulatory Scrutiny

  • Sales desks providing less market info, Greenwich says
  • Electronic trading dominates three-quarters of currency volume

Currency sales desks are offering fewer trading ideas and less market intelligence to clients because of increased scrutiny from regulators, according to a report from Greenwich Associates.

The report illustrates how the currency-rigging scandal that has involved some of the biggest banks in the $5.3 trillion-a-day market is filtering through to customers.

“Dealers are distancing themselves from anything that could be perceived by regulators as compromising client confidentiality,” Jasper Clark, a consultant and author of the report, said in a statement.

“Salespeople and traders are now reluctant, or are by bank policy prohibited, to continue the longstanding practice of providing market flow commentary based on ‘anonymized’ client trading data -- information that is highly valued by many clients,” Clark wrote.

The report is based on interviews with more than 2,600 participants in currency markets at corporations and financial institutions in the Americas, Europe and Asia from September to November of 2014.

The rigging of foreign-exchange rates, conducted through private chat rooms among traders, undermined market confidence, resulted in firings or suspensions and fines levied on financial institutions.

The reluctance to provide trading information coincides with a surge in electronic trading, Greenwich said. Three quarters of foreign-exchange client trading went through electronic platforms last year, compared with less than 60 percent in 2010, the Stamford, Connecticut-based consultant said.

“Even in the electronic age and with regulatory scrutiny at an all-time high, human insight about the market is critical to many foreign-exchange users,” Clark said.

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