Two weeks ago, SA’s Competition Commission announced that it was investigating all these naughty International Banks for “rigging the Rand”. I wrote a bit about it here – but I’ve done more reading since, so I wanted to give a quick update.
Summary: the more I read, the more I think that this is all overreactive.
Sure, the Big Banks have done Bad Things in the past – but when it comes to the FX trading side of things, the logic involved seems to be:
- Banks do Bad Things;
- Look at this chat room!
- THE BANKS HAVE OBVIOUSLY DONE MORE BAD THINGS.
- GET MAD, PEOPLE.
I would write more, but that could take your time away from reading this article: “Oranges, Lemons and Forex“. Which you should read. Immediately. Bookmark it now. It’s one of the best things I’ve read in ages: explaining the forex fixing scandal in terms of a villager travelling down to the market square to buy oranges.
Don’t pause for thought. Just click the link. Here it is again: Oranges, Lemons and Forex. Read it!
The conclusion:
- People-with-money demand that bankers do their forex exchange.
- People-with-money are outraged at having to pay bankers to do their forex exchange.
- People-with-money insist that the bankers do the forex exchange for almost no fee at all.
- People-with-money are then surprised that bankers don’t want to do stuff for free and end up having to organise their own fee without bothering the people-with-money with the details.
- Who are those people-with-money?
- Fund managers, mostly. Who are rather lazily trying to palm off their foreign currency exposure management to banks without having to sacrifice any of their Fund Management fees.
- Tsk.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.