Wider Window for FX Benchmarks?

Global regulators ponder options for preventing manipulation of WM/Reuters benchmark rates.

Global regulators published details of their plans to overhaul foreign-exchange (FX) benchmarks in response to allegations that traders colluded to manipulate rates in the $5.3 trillion-a-day currency market.

The Financial Stability Board (FSB) proposed changing how the most popular rates, from WM/Reuters, are calculated by extending the length of the one-minute windows on which the benchmark is based, and requiring firms to install systems to address potential conflicts of interest with clients. The Basel, Switzerland-based FSB set an Aug. 12 deadline for comments on the plan.

WM/Reuters rates are published hourly for 160 currencies and half-hourly for the 21 most-traded. The benchmarks are based on trades in a minute-long period starting 30 seconds before the beginning of each half-hour. The most widely used is the so-called 4 p.m. London fix.

There is a “concentration of trading by dealers during the calculation window, although trading volumes start to rise shortly ahead of the fixing time,” the FSB said.

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