The Financial Stability Board is a group of regulators from across the globe. It has started reviewing the benchmarks for foreign exchange following recent allegations that traders had colluded to fix rates in the currency market that moves $5.3 trillion per day.
The FSB has a group reviewing the process by which the foreign exchange benchmarks for foreign currency are set. Later this year the group’s findings will be presented.
The committee will look at how the exchange benchmarks are put into use and the functioning of the foreign exchange market, said a spokesperson for the group, which is based in Basel, Switzerland.
The FSB, which is led by Mark Carney, the Bank of England governor, has regulators and members of central banks from across the globe, whose goal is to agree upon worldwide financial rules. The FSB reports to a 20-nation group and set up its task force in 2013 in an attempt to replace the tarnished benchmarks following the attempts of manipulation in the interbank offered rate in London know as the Libor.
The WM/Reuters benchmark rates for 160 currencies are used by investors and businesses across the globe. They are determined by the trades executed over a period of one minute known as “the fix,” which starts 30 seconds prior to 4 p.m. London time.
Traders entered chat rooms to share their information about clients’ positions with their counterparts in other banks just minutes prior to 4 p.m., and decided together to push the trades through to maximize the impact they would have on the benchmark rate.
England’s Central Bank said earlier in the week that it was reviewing the allegation that officials had condoned the chat room use to share information about clients heading into the day’s fix.
The benchmark rates determine what many money managers and pension funds pay for foreign exchange and index providers used them.
