Johannesburg - Big moves on the foreign exchange (forex) market would now receive more scrutiny from the SA Reserve Bank, deputy governor Daniel Mminele said yesterday. “At any point in time, if there are big movements in the market, or there are issues that we believe may warrant investigation, we reserve the right to give the issue much more scrutiny,” he said.
The Reserve Bank would also look into stepping up surveillance to protect confidential client information and regulate foreign exchange dealers more closely.
A panel established to investigate South Africa’s foreign exchange markets found that some of the country’s authorised dealers inappropriately shared confidential client information, and recommended that laws be changed to enable authorities to prosecute traders in future.
While the foreign exchange review committee found no evidence of malpractice or “serious misconduct” in domestic rand trading, it proposed extending insider trading laws to apply to currency dealers.
There is no immediate need for “criminal investigations or punitive measures” as it had not found evidence of “front-running client transactions, collusion or the manipulation of any foreign exchange benchmarks,” the panel said.
The Reserve Bank and Financial Services Board appointed the panel, headed by former senior deputy governor James Cross, in October 2014, after concern that trading in the rand might be vulnerable to currency manipulation in overseas markets.
“We were concerned that this would render the rand currency vulnerable to manipulation,” Mminele said, speaking at a press conference to release the findings of a year-long review by the Reserve Bank into foreign exchange trading rules.
Global turnover
About 20 percent of trading in the rand takes place in South Africa, with foreigners accounting for 60 percent of domestic turnover, according to the report. Global turnover in the rand is estimated at about $60 billion (R783.51bn) a day, just more than 1 percent of total trading in the world.
South Africa has 25 authorised dealers, with seven of them accounting for 95 percent of local turnover. The review committee, together with market participants, drafted a code of conduct for over-the-counter markets and recommended a change in legislation that would allow the code to be “subsidiary” law.
It also proposed that sections of the Financial Markets Act dealing with insider trading, market manipulation and false reporting be extended to the foreign exchange market.
The intention was to create a regulatory framework where “the rules are the same, whether you’re trading on an exchange or on an over-the-counter market”, Cross said.
A parallel investigation by the Competition Commission into the fixing of foreign exchange trades by several global banks was still underway, the Reserve Bank said, and it would take action if irregularities were uncovered.
“The Competition Commission made known that they have information relating to what could possibly relate to unlawful conduct by certain international banks in relation to rand trading in offshore centres,” Mminele said.
In May, the commission said it was probing BNP Paribas, Citigroup, Barclays, JP Morgan, Investec, Standard Bank and Standard Chartered for alleged price rigging and collusion.
* Additional reporting by Bloomberg and Reuters
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