Benchmarking

Foreign Exchange traders at a number of major banks have been indulging in practices which may have financially disadvantaged customers who have executed FX deals at “benchmark” rates. If you have ever executed deals on this basis, you should speak to us about the possible implications. Our opinions will be totally impartial.

If you are an investment firm, where you may have a fiduciary duty to deal on a “best execution” basis, then you probably need to consider your position. Dealing at a benchmark rate may not satisfy your customers, if the FX benchmarking investigation develops further, and your customers form the opinion that they have incurred opportunity costs due to a passive “benchmarked” FX hedging strategy.

There are plenty of passive strategies that offer transparency and good execution (for example time-weighted average pricing) but, there is a body of opinion that says dealing at the 4.00 pm fix is not one of those strategies.