Ruled out: can regulators settle the pre-hedging debate?
Market participants are at odds over the practice and whether regulation or principles can settle the score
Rules or principles? It’s an age-old debate. And one that’s raging around the dealer practice of pre-hedging – or hedging in anticipation of a client trade.
Pre-hedging can improve or worsen the price at which a client executes its trade.
Global regulators have been asked to arbitrate. While critics want to see firmer action from them, and restrictions put in place, others see industry-guided principles as being enough to ensure fair play.
“There is potentially a problem to be fixed, but just
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