In the light of all the news and scandals on bank pricing manipulations, libor fixings and insider trading, some of the world's biggest banks have decided to do a major overhaul of their current foreign exchange strategies.
Barclays Plc, Deutsche Bank AG, Goldman Sachs Group Inc., Royal Bank of Scotland Group PLc and UBS AG have started to implement strategies and measures in order to reduce risks and regulate market opportunities that can lead to future misunderstandings. It will be harder for the traders to benefit from confidential information and take advantage of its clients in the currency market.
Banks have implemented a cap on what traders or salespersons can charge their clients on currency trading. They are also aiming to reduce the trader's access to information on client's orders and prohibited the use of public online chatrooms.
Practices of firms for the longest time have been restricted to avoid future doubt from the client side. Banks are forced to be more careful of their actions after allegations that currency dealers had leaked private client information to their counterparties in other institutions. The probe will also include the manipulation of the currency's fixing price by bombarding the market with large ticket trades just to move the Reuter's benchmark rate a few minutes before the rate is set. This caused the probe on the benchmarking of currencies.
Another concern is the charges that banks withold from their clients. Regulators are concerned banks are taking advantage of ots less sophisticated clients by charging more mark up compared to their alpha clients who are more aware of market levels. Greater transparency of he market for clients will be one of the regulator's aim. This can be achieved by shifting clients to an e-platform instead of voice.
All of these violations will affect the bank in terms of cost (fines they will have to pay if proven guilty) and trust of thieir clients.
Bank are now more careful of their actions as the regulatory board will be more strict on observing the trading behavior of banks, particularly near the fixing window. Compliance are stricter and client information has become more sensitive.
