Regulators missing the elephant in the room

Benchmark behaviour dwarfed by FX credit exposure risks

Elephant in room

Regulators are missing the biggest risk in foreign exchange markets, according to participants, who point to outdated practices and insufficient controls over credit exposure management at banks operating prime brokerage (PB) services and at trading platforms.

The heart of the issue is the lack of a market-wide, real-time and pre-trade risk management infrastructure. PB service providers routinely over-allocate credit to clients on different platforms and to avoid constant adjustments, which can