In his annual Mansion House speech to the City of London this evening, UK Chancellor George Osborne will announce a review, and maybe more, into the alleged forex market rate-rigging in London particularly around the fixings

The integrity of the City matters to the economy of Britain. Markets here set the interest rates for people’s mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy. I am going to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them.

The BBC carries this

The reforms will be informed by a review by the Bank of England, Treasury and Financial Conduct Authority into the operation of financial markets and the scope of regulation of wholesale markets

As regular participants in this market we will all pay close attention to what the outcome of this review brings. There is a distinct danger of throwing the baby out with the bath water by regulators and politicians who understand little about a market which is already seeing a reduction in volumes and volatility as bank desks lose their appettite for risk.

Given that over 95% of the $5.3 trillion a day global turnover is speculative I would imagine that they will come to the conclusion that forex markets are largely “non-essential” areas of banking. If accusations of rate-rigging at the fix are proven then that leads to questions over front-running of all orders including option expiries, something which in my interbanks days was an accepted practice to protect the bank’s best interests.

The Forex market is all about flows, both volumes and info, and has been largely well self-policed over the years even if hugely under-regulated. Traders have been free to buy and sell on a whim quite apart from any natural business and this has provided the backbone of market moves that the retail market has been keen to feed off.

Of course the fixing allegations are a serious abuse of knowledge and suggest deliberate manipulation but we must hope that the findings of Osborne’s review are balanced and show a realistic understanding of the largely good market practice that currently takes place. And not just measures with one eye on soothing the electorate ahead of next year’s General Election.