Following the Financial Times article on “Probes into forex trading” by Daniel Schäfer and Caroline Binham, Guillaume Prache, Managing Director EuroFinUse, showed his concerns regarding the lapse in public supervision , which has been going on far too long, in a letter to the newspaper. With a quadrillion dollars (that’s 1 followed by 15 zeros) in transactions per year - or $5 trillion worth of trading every day - the currency market is by far the largest financial market in the world, dwarfing all other markets, but remains the utterly opaque, largely unregulated and prohibitively expensive for individual end-users.
EuroFinUse believes this is an alarming situation that needs to be addressed post haste and is miffed by the fact that the European Union institutions missed the opportunity to submit these markets to regulation. Astonishingly, the EU completely forgot about it when reforming European Financial Supervision in 2010 and not one of the EU Authorities – not even the European Securities and Markets Authority (ESMA) - has a mandate to supervise the largest financial market in the world.
In light of the EU’s stated intentions to have the financial sector contribute more fairly to the costs of dealing with the crisis - given their part of the responsibility vis-à-vis the crisis as well as the current under-taxation of the sector – it is the more shocking that these transactions have not been mentioned either by the EU or by national governments with respect to, for instance, the Financial Transactions Tax (FTT). By contrast, both the EU and some Members States have been keen to charge the heaviest FTT on smaller equity transactions, primarily hurting smaller real economy investors that are independent from the industry.
Currency markets operate in a ‘no man’s land’ when it comes to supervision and have been left largely unchecked by regulators. There is no good reason for this. If anything, there are plenty of reasons to enforce the same transparency rules for currency markets as for equities and submit these markets to more supervision and more competition. Individual investors and consumers would then benefit from a transparent and competitive market with reasonable prices for currencies.
Standard setters and authorities in Brussels should tackle this matter immediately and with serious intent.
Please read the full letter here and EuroFinUse Blog's post The Currency Market: another scandal yet to happen?.