Past “rotten culture” in FX is a reminder that trust is the ultimate asset

Rick Steves

These days brokers constantly complain about regulators tightening their restrictions and suffocating them with new rules, but they do protect customers and enhance the FX industry’s reputation.

The global currency trading scandal started over ten years ago but it continues to ripple across the industry as news headlines keep investors’ memory alive.

The European Commission has recently fined Nomura, UBS, and UniCredit for their role in a wider cartel on government bonds which included Bank of America, Natixis, and WestLB. The total penalty for their actions between 2007 and 2011 amounts to €371 million.

The revelation that banks colluded for at least a decade to manipulate exchange rates for their own financial gain sent regulators in Europe, Asia, Switzerland, the United Kingdom, and the United States to investigate, announcing fines from 2014 onwards.

HSBC was fined $275 million by the CFTC and $343 million by the UK FCA, amounting to $618 million. The story isn’t over for the bank, however, as a trial at London’s High Court is about to rule on an alleged “blatant and indefensible” forex fraud that took place between 2004 and 2006 – 15 years ago.

The alleged victim, ECU Group, accuses HSBC and its FX traders of misusing confidential information about its trades for their own profit.

Front-running client orders is a practice that was pervasive for years, but a stricter regulatory framework that has been established since then is believed to have curbed this kind of market abuse.

As online FX trading rose to prominence in the late 1990s, quite a few rotten apples within the FX industry have made their business hurting retail traders and, as a side effect, the sector as a whole as customers became wary.

Regulation of FX and CFD products has come a long way since then and the emergence of external dispute resolution organizations has also contributed to building trust between traders and brokers.

“FX trading historically wasn’t aimed at retail clients and was reserved only to big players – banks and market makers. Things have changed and it is great that now almost anyone can get access to this immense market”, said Natalia Zakharova, Head of Business Development of FXOpen, a retail and institutional FX broker founded in 2003.

“The customers are also getting more and more knowledgeable and experienced. However, around 20 years ago when FX’s popularity was starting to grow most clients were not sufficiently informed about risks and fell prey to misleading marketing practices and shady brokers who manipulated the pricing, chased stops and resorted to insider trading”, Ms. Zakharova continued.

These days brokers constantly complain about regulators tightening their restrictions and suffocating them with new rules.

“This might be true, but on the other hand, the fact that brokers are required to report the trades, reveal their LPs and execution standards leads to better protection of the customers and, potentially, a more reputable and established industry”, she said, adding that the FX world can definitely recover from its history of market abuse and perhaps even become the industry defined by transparency and high business standards.


Read this next

Retail FX

Investors from Cyprus and Dubai acquire ‘significant stake’ in M4Markets

Seychelles-regulated brokerage firm M4Markets firm has picked up some investment from Cyprus and Dubai based investors in a new funding round that it will be using to grow its business.

Executive Moves

UAE broker Amana elevates Amr Masry to sales director

Amr Masry has been promoted to a new senior role at Amana Capital, becoming the group’s newest Sales Director, following a successful tenure with the UAE-based FX and CFDs broker.

Executive Moves

TopFX promotes Omar Al-Janabi to head of sales and business development

Prime brokerage firm TopFX has strengthened its Middle East operations with the promotion of Omar Al-Janabi, who is taking on an expanded role as global head of sales and business development.

Retail FX

Plus500 says 2022 revenue to be ‘significantly’ ahead of analysts’ estimates

Israeli-based, but London-stock market listed Plus500 said it expects annual revenue and earnings to be ahead of analysts’ estimates even as trading levels normalised from record volumes in the first quarter.

Digital Assets

Crypto derivatives giant BitMEX launches spot market

Crypto exchange BitMEX is looking to branch out of its singular focus on crypto derivatives with a suite of new product offerings. Although derivatives are to remain at the heart of BitMEX’s business, the popular platform will add spot crypto trading as it aims to aggressively grow their user base.


PrimeXM reports mixed trading volumes for April

PrimeXM has reported weaker trading volumes for April 2022, in line with other institutional and retail platforms that saw the activity of their clients dropped compared to a month earlier.

Digital Assets

DLT Finance approved by BaFin to support brokerage and custody of digital assets

DLT Finance is already partnered with big names within the digital asset space, including Kraken, Bitstamp, B2C2, and Bittrex.

Institutional FX

LUKB taps vestr to launch actively managed products, AMCs

The partnership with vestr goes to show the growing importance of digitising the active investment management space.

Digital Assets

Jewel taps Tokeny to launch stablecoin-as-a-service solution on Polygon

Jewel aims to offer a stablecoin-as-a-service solution to other digital asset and financial institutions B2B, allowing those businesses to provide cheaper, easier and near real time payments with stablecoins issued and redeemable directly at the bank level at Jewel.