With banks paying out multi-billion-dollar fines, the regulatory focus on the spot foreign exchange market is expected to to widen to other FX markets.

“We know that the attention right now is squarely on the spot market,” Stephen Anikewich, head of buy side/sell side compliance at Nice Actimize, told Markets Media. “However, the spot market is one slice of the pie. It’s a big slice obviously, but it’s still only one-third of the risk pie.”

Any activities in the spot market which appears to be price manipulation might have a nexus to the trading activities and risk exposure in the other two-thirds of the pie. “It’s not enough to just look at market manipulation, but looking at interconnections between financial markets is critical,” Anikewich said. “Price manipulation on a specific financial market could be a result of manipulation in an interconnected second market.”

If market participants were to shift out of spot FX into other FX asset classes, the risks of price manipulation could shift along with it. There are signs of this happening, according to Anikewich.

“There appears to be some shift, not significant right now, but a shift away from spot to some of these other products,” he said. “While spot does have a big slice of the pie right now, you have to allow for the possibility that it might get a little bit thinner over time and that some of that activity might migrate to some of the other products, making those areas a little bit more compelling from a risk-management perspective.”

There is also the challenge of causation and correlation between FX and other asset classes. “Just as there is an argument to be made for having to look for unusual activities in some of the other product classes in FX, one might also want to think, simply from a macro-trading perspective, whether or not there might be a nexus, not just across different products of the same asset classes, but perhaps between different asset classes themselves,” said Anikewich.

To the extent that there is some correlation, for example, between FX and rates and/or commodities, “might I need to extend out either my policing and monitoring capabilities as a regulator or as a regulated member of the financial industry group to make sure that I’m including those other asset classes within my radar as it relates to the type of business model that I have,” he added. “This is not just a sell-side issue, this is obviously a buy-side issue as well.”

Regulators would have to construct something akin to the Consolidate Audit Trail for equities in order to visualize the interrelationships between the FX spot markets and other markets, but this is not likely to appear on the horizon anytime soon.

“The SEC and CFTC have been spinning their wheels with putting together this data warehouse for market transactions ever since the time of the flash crash, which was five years ago,” said Anikewich. “By way of extension, you assume that they’re going to need that same type of data as relates to the FX market. It’s going to become an even bigger problem because that’s not portable data in many cases. They’re not going to be able to wrap their arms around it from a surveillance perspective.”