Bloomberg reports that the UK will announce new regulations for the FX market as a response to the stories of WM Reuters benchmark rate manipulation at the London close. Chancellor of the Exchequer Osborne may announce these rules at his annual address to be held next week. While details are slim at this point, it is expected that they may include making the manipulation of benchmarks a crime, as well as mandating additional oversight of bank employees involved in benchmark rate setting, by their employers.
Clearly some change is required following the news reports, suspension of traders by banks and the first hints by some regulators that misconduct has been found in FX. However, maintaining the liquidity of the FX markets should be paramount. The information regarding potential manipulation has already started many market participants to review how they can improve their use of, or whether they should use, FX benchmarks.
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