Regulating FX market may prove costly

Foreign exchange is the last unregulated asset class, but that is starting to change, with major implications for banks, brokers and investors.

Regulating FX market may prove costly

Trading foreign exchange has been lucrative for the major international banks that dominate it. The asset class continues to grow, now experiencing $5.3 trillion of average daily turnover, according to the Bank for International Settlements.

Until recently this was unregulated, but that is now changing. Although the size of the FX market will probably keep expanding, particularly if the renminbi becomes more easily tradable, increased regulatory costs combined with technological innovation threaten banks’ profits.

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