British MP Says No Need to Hurry to Regulate Forex Industry

A British MP has said that governments shouldn’t rush to fully regulate the forex market following allegations that major banks conspired to fix key forex benchmarks.

Andy Love, who sits on the UK’s parliament’s Treasury Select Committee, voiced his opinion on the sensitive matter, saying that if the banks and the forex industry as a whole took measures to address the issues surrounding rigging benchmarks and collusion among staff, then there is no need to rush to heavily regulate the industry.

“I think only in the circumstances where it was felt that the damage to public confidence was so great and the response of the industry so limited, would it be felt that regulation was warranted,” Love said, according to Reuters.

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Players in the FX market, including major banks, are nervously monitoring regulators for any indicators that a looming shakedown of the world’s largest self-regulated money market. They argue that heavy regulation will simply cause costs to skyrocket, eroding gains resulting from years of increasing efficiency in the sector.

So far, no regulator has tabled any proposal to regulate the forex market, though banks are expected to pay huge settlements should they be found guilty of manipulating the forex benchmarks, just like it happened in the case of fixing the Libor target interest rates. Nonetheless, most traders expect the push for regulation to gather momentum this autumn when the European Union to continue with its work on a law that regulates forex benchmarks.

However, Martin Wheatley, UK’s Financial Conduct Authority chief, said in 2013 that it could be a big step for authorities to determine whether to forex market needs to be formalized.

“If it’s necessary in order to have the trust and confidence for the market place to be regulated then so be it,” Love added.”But I think we need to wait and see how the industry responds and how deep the forex scandal goes before we decide if a regulatory response is the appropriate one.” To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com