simon m potter : trends in foreign exchange markets and the challenges ahead remarks by mr simon m potter, executive vice president of the markets group of the federal reserve bank of new york, at the 2015 fx week conference, new york city, 14 july 2015. * * * i would like to thank robert lerman and jamie pfeifer for their excellent assistance in the preparation of these remarks and colleagues in the global central bank community for numerous insightful comments and suggestions. good morning. it ’ s a pleasure to be here. let me extend my thanks to fx week for the invitation to speak at this conference. before i begin, i would like to note that my comments today reflect my own views and not necessarily those of the federal reserve bank of new york. the ability of households, corporations, and sovereigns across the world to safely and efficiently exchange assets denominated in one currency for assets denominated in another is essential to a healthy and robust global economy. these transactions can occur for myriad reasons – to support the flow of goods, services, and investment across national boundaries, to diversify the savings of retirees, or to hedge risks associated with manufacturing a particular type of product. these transactions all rely on a foreign exchange market that functions with integrity – that is, one that allows a diverse set of buyers and sellers, supported by robust infrastructure, to confidently and effectively transact at prices that reflect available market information and in a manner that conforms to acceptable standards of behavior. in my remarks today, i would like to expand on the essential role that the foreign exchange market plays and examine some of the ways the market ’ s structure has changed in recent years. then, amid the backdrop of a number of recent negative developments – specifically, evidence of unethical and illegal behavior by some market participants – i will discuss the critical role that implementation of and adherence to strong global industry standards, including best practices, can play in restoring and maintaining the integrity of the foreign exchange market. in doing so, i will highlight recent and ongoing efforts to help strengthen these standards through the financial stability board and collaborative efforts by major central banks and market participants working within and across jurisdictions, often through local foreign exchange committees. i will conclude by setting an expectation for all market participants in foreign exchange to help support this work in order to reinforce the integrity of, and the public ’ s trust in, this important market. the importance of the foreign exchange market the foreign exchange market is perhaps the largest, most globally integrated

to microfinance ( mf ) providers to top and middle tier microfinance banks ( mfbs ) and microfinance institutions ( mfis ) for key investments in hr, it, product development, risk management systems, business plans and branchless banking development. the microfinance credit guarantee facility to link microfinance with financial markets for mobilization of wholesale commercial funding through partial guarantees. similarly, the financial innovation challenge fund ( ficf ) for grants to innovative projects and testing new markets to lower cost of delivery, enable systems and procedures to be more efficient and provide new ways of meeting the larger demand for financial services. and the improving access to financial services fund which is supporting today ’ s program. these are mostly supply side interventions aiming to increase financial services by removing bottlenecks and have raised financial inclusion to a certain extent. however, what has been missing is a demand side solution – a program to impart financial education and awareness to consumers. this recognises that the very low level of financial awareness and confidence of financially excluded groups remains a strong barrier to their access and use of financial services. in addition, there are risks involved in creating new opportunities for consumers if the consumers are not proficient at making financial decisions. therefore, going forward, sbp considers financial literacy as an integral part of the financial inclusion strategy. financial literacy has assumed greater importance in recent years for both developed and developing countries, therefore, best practices in this area are still evolving. however, synthesizing from the oecd ’ s high level principles for financial education, some best practices are : first, the financial education program must involve key players from the beginning. this may take a lot of time and effort due to slow decision making process but will ensure success of the program in the long - run. in particular, the consumers must be consulted to understand bis central bankers ’ speeches their preferences and identify appropriate curriculum and dissemination channels and tools. therefore, financial education surveys must be conducted to appropriately identify the needs and to set a baseline for program monitoring. this will also help identify teachable moments for low income groups that may typically occur around the receipt of money, the need for credit etc. second, it is better to implement and earn quick wins to generate positive energy such as starting from a pilot launch initially before going national to gain the buy - in of all the stakeholders. third, the program design should be flexible enough to enable diverse stakeholders to join - in and create synergies. this