ACI - The Financial Markets Association : New Banking regulation - Proprietary-trading
(Thomson Reuters ONE) - It is with great interest that ACI The Financial Markets Association (ACI)follows the ongoing discussions and statements made by some senior internationalofficials on their call for additional banking regulations e.g. towards'Prop-Trading' (Proprietary Trading).ACI represents a huge part the FX (Foreign Exchange) and Money Market traders'from the financial industry (including Derivatives) and raises concerns on themainly shallow discussions held so far. The actual financial crisis is a hugepuzzle of occurrences which need to be carefully examined. Of course there willbe some envisaged advantages from new regulations but generic and politicalmotivated statements are less helpful in these days. The diversity of products,the variety of different investment strategies but also the differentbackgrounds/demands within the financial markets became too big for simplyunifying all markets.Precisely the traders of ACI The Financial Markets Association massively helpedat the peak of the crisis to lead their banks through and to enable thebalancing of liquidity in the most difficult times. This just was possiblebecause of our international trader's network, because of trading positions forown account (prop-trading), but also because of our internationaleducation/certification programme as well as of our 'Model Code' - the codex ofbehaviour and closing of business/tickets in the OTC ('over-the-counter')markets.Prop-Trading and arbitrage within authorised limits (mainly regulated by thelocal banking supervision) remain imperative for well functioning markets.Additional and unqualified regulations on prop-trading risk again the erosion ofliquidity within the financial markets only to become solved again by massivefunding of liquidity via Central Banks - this cannot become again the goal ofnew regulatory innovations. 15/09 (the start of the Lehman crisis) eroded thetrust in the financial markets and led to a massive reduction of interbanklimits (which caused enormous difficulties in the shifting of liquidity betweenthe international markets/operating banks). This automatically caused areduction in trading. The current discussions put all banks under one umbrella -with some negative sentiments towards all operating banks. ACI stresses theimportance to differentiate between quasi investment banks and ordinary businessbanks and the enormous importance of Treasury/Liquidity departments and theirnecessity in any future configuration.The global financial markets changed dramatically during the past ten years. Theenormous boom in commodities (increase of exploration, increased revenues) etc.increased the money flow and with that demand for investments. Volumes indifferent currencies held by Sovereign Wealth Funds, but also other assetclasses like Pension funds, the Currency Reserves by Central Banks etc. haverisen dramatically and are demanding for a huge variety of investment policies.These challenges needed and still needs to become mastered by the (mainly)banking industry. Prop-Trading helps to maintain the markets liquid - if this isnot the case any more, politicians will also have to change the whole social andeconomic system.FX and Money Markets did not induce the financial crisis. Contrary, both productgroups helped considerably in managing the crisis and were crucial in helpingtheir bank to survive. A cut in prop-trading or even the implementation of afinancial transaction tax on these products would have massive impacts on theoverall-liquidity within the financial markets. All considerations towards suchtrends have to be lead with utmost reservation. Such discussions will needhighest degree of data accuracy, will demand discipline and neutrality in talks;but also reservation as well specific quality and ethical public reporting (bypress and other media).The global economy still will face difficult times ahead - starting from now thebest heads have to accept the challenges of the enormously grown economies(industrial and financial ones) to adjust them, analysing the needs and adaptingafterwards new regulations.ACI is the leading, global association of wholesales financial marketprofessionals and counts some 13,000 international members - www.aciforex.org
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Datum: 27.01.2010 - 05:50 Uhr
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