Thomson Reuters changes its forex Rule Book to promote closer surveillance

The changes aim to discourage abuse, manipulation or disorderly conduct by making order execution easier and promoting closer surveillance and reporting of client trading activity.

"We want to make sure people are using the platform for its intended purposes - genuine commercial interest in trading - and ensure that's the kind of liquidity we're getting," said Phil Weisberg (photo), Thomson Reuters global head of FX.

Weisberg was founder and chief executive of trading platform operator FX Alliance which Thomson Reuters bought for $625 million in August 2012. He became Thomson Reuters global head of FX in December of that year.

Foreign exchange is the world's largest and one of the least regulated financial markets, with $5.3 trillion traded on an average day. London, accounting for some 40 per cent of the market's international business, is its hub. Thomson Reuters is one of the two dominant foreign exchange trading platforms. The other is EBS.

Regulators have been investigating allegations of price-rigging and collusion between traders. Britain's Financial Conduct Authority and the US Department of Justice are looking into claims that senior traders shared market-sensitive information relevant for the London fix, which is set at 4 pm London time, using actual trades.

The key benchmark, known as the WM/Reuters fix, relates to several exchange rates including the euro, sterling, Swiss franc and yen. They are compiled using data from Thomson Reuters and other providers, and are calculated by WM Company. WM administers the WM/Reuters Service. Through an agreement, Thomson Reuters is a primary source of rates to WM from which WM applies its methodology and calculates the benchmark. Thomson Reuters is one of the distributors of the rate.

The Rule Book changes, which follow consultations with market participants over the last year, outline new guidelines for fill ratios, minimum quote lives, and tick sizes.

Fill ratios measure the proportion of client orders that are actually executed, the minimum quote life ensures orders are available long enough for potential counterparties to trade, and the minimum tick size helps ensure participants place real orders rather than just expressions of interest.

Note: This story has been re-cast. An earlier version erroneously linked the Rule Book changes to the UK and US investigations. ■