Global Regulators Eye Increasing Flash Crashes in FX Trading

Reuters is reporting that “sudden, violent and often quickly reversed price moves” have been occurring frequently in the global currency markets and causing concern among regulators. Two major crashes in January and February of this year severely affected the yen and Swiss franc and prompted fears that a major crash event could threaten financial stability on a wider scale. An IMF official quoted in the Reuters report said the frequency of these crashes may be pointing to a major liquidity stress event in the future. Another official from a G10 central bank quoted by Reuters said bankers and policymakers agree that an industry-wide switch to machine-trading in currency markets is behind the frequency and severity of the price moves, meaning that further crashes are likely.