Global regulators are “hearing but not listening” to the currency market’s calls about how to put a stop to foreign exchange manipulation, according to the CEO of a currency trading platform.
David Mercer, CEO of LMAX Exchange, which trades $10 billion (£7.5 billion) in currency daily after only launching 5 years’ ago, told Business Insider that he met with US and UK regulators on plans to improve market transparency.
However, he says that the market has become disillusioned with regulatory initiatives over the last two years.
“We’ve engaged with the UK’s Financial Conduct Authority, the Bank of International Settlements (known as the central banks’ central bank), the Bank of England about the Fair and Effective Markets Review (FEMR), and the New York Fed, and they definitely hear but they don’t listen. It’s disappointing,” said Mercer.
“The biggest [area] for abuse in the FX market is ‘last look’ and the lack of transparency of who is trading with whom since most of of FX is done trading over-the-counter (OTC). The regulators are just papering over the cracks of a broken mechanism that is open to abuse.”
“Last look” gives liquidity providers the option to reject a trader’s order, even if it matches up with the trader’s quoted price. If the order is rejected, the price for the order can “slip,” putting the trader at a disadvantage.