Hedge funds facing increased scrutiny from expanding FX market

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Be careful what you wish for - that’s the advice from State Street to the newest market makers in the $5.3-trillion-a-day foreign-exchange market.

Bloomberg News reports that as hedge funds and automated-trading firms ramp up their currencies businesses, they’ll probably attract more interest from regulators, said Chip Lowry, senior managing director at State Street Global Markets in Boston, in a conference call Tuesday hosted by Greenwich Associates.

Algorithmic trading firm and brokerage KCG Holdings said it’s accustomed to dealing in highly regulated asset classes such as equities and favours a more comprehensive approach to foreign-exchange regulation to give investors better information about pricing, execution and order handling.

“As nonbank liquidity providers become a more important part of the market, they will undoubtedly draw attention of regulatory authorities,” said Lowry, who’s also the chairman of the Foreign Exchange Professionals Association, a Washington-based industry group. “This is going to be a bigger part of the market infrastructure going forward - be careful what you wish for, because with that comes some interesting potential scrutiny.”

To access the complete Bloomberg News article hit the link below:

Hedge Funds Face More Scrutiny as They Expand FX Market Making

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