Importance of Regulation for Institutional Trading
When it comes to the institutional trading, local central banks loosely control the currency markets. There is no single global regulator present for policing the worldwide forex market. However, the demand of a regulator for the institutional forex business cannot be ruled out altogether and You'll find a couple of reasons behind that as well:

Systemic importance of the huge Banks

Till this date, the forex trading losses for some of the biggest corporations and economic institutions are not officially released. Even for trades with such large scales, There is certainly constantly a possibility that on wrong currency bets, losses worth billion dollars will happen. It's a reality that currency trading can be a zero sum game: however, if a huge bank incurs big losses, the same is expected to have a ripple effect on the global economy as well, mainly due to the fact of the symmetric significance of the same.

Higher Hedging Costs

If the speculation gets to an excessive level, the currency volatility in forex trading will be increased as well. Such issues lead to higher costs incurred by the corporations and at the same time the other commercial players as well, mainly since of hedging currency risk.

Undue Enrichment of some individuals at the expense of Million Others

If a currency moves in an exaggerated or unjustified way, the same generally has an adverse impact on the overall economy of the nation, apart from currency markets. a couple of of these moves could be justified by the underlying monetary fundamentals in some instances. However, for many other cases, the temporary weakness in a currency can easily be exploited by the speculators, that as well fairly ruthlessly. This sends the currency into a free-fall, just for self-fulfilling prophecy. Such incidents usually trigger capital flight and a prolonged recession as well. This really is precipitated by sharply higher interest rates for defending the currency. On the last 2 decades, this circumstance has played out in multiple occasions and as an example, you'll be able to take the collapse that Baht, the main currency of Thailand skilled in July, 1997. A subsequent crisis all over the Asian region followed as well. The currency speculators were able to exploit the circumstance and make profits worth millions. However, many other men and women inside the affected nations suffered.

Major currency traders may possibly oppose the concept of regulation for the institutional trading program for their own positive aspects and proper functioning. However, for the sake of overall transparency, It's required and hence the significance cannot be ruled out altogether.