Economic Commentary: Towards a better-functioning foreign exchange market
Date
08/12/2015
Extensive global reform efforts are currently underway aimed at improving conduct on the foreign exchange (FX) market by enhancing financial benchmarks and codes of conduct. The responsibility for implementing the new reforms in practice rests to a large extent with market participants. These include the major Swedish banks and other Swedish participants who are active on the FX market.
The FX market is a large and global market where market participants trade currency. It fulfils an important function in the financial system and it is therefore important that the market functions well. Recent years have demonstrated, however, that self-regulation on the market has not worked satisfactorily in several countries. This has led the authorities to initiate global reforms in order to improve the conduct of market participants. This work has included the drafting of recommendations on how participants should determine reference exchange rates and manage their trading at such rates. A new global code of conduct for FX trading is also being established. To contribute to a well-functioning FX market, it is important that market participants actually apply the new guidelines in practice. This responsibility also rests with the major Swedish banks and other Swedish market participants.
In this Economic Commentary, the author presents the reforms of the FX market that are in the process of being implemented and how these affect Swedish market participants.
