BSP denies currency ‘flash crash’

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The Bangko Sentral ng Pilipinas (BSP) denied the reported currency “flash crash” on Tuesday, arguing that the trading platforms mentioned by observers were unofficial.

On Wednesday, BSP Governor Benjamin Diokno told reporters, “The abrupt peso appreciation yesterday mentioned in the article was captured by the currency quotes from Google as well as certain social media platform.”

“We would like to highlight that the source feed is not Bloomberg nor the Bankers Association of the Philippines (BAP). The official sources are the Bloomberg and BAP only.”

Diokno is responding to press reports quoting Albay Second District Rep. Jose Maria “Joey” Salceda’s statement, in which he called for the central bank’s attention to a possible US dollar (USD) and Philippine peso (PHP) “flash crash” on July 20 in the afternoon.

According to Salceda, the USD to PHP rate on numerous foreign currency platforms decreased from P50.54 to as low as P42.82.

The BSP, for its part, believes that these programs that showed a substantial drop in the USD/PHP rate had a problem with their source feed, Diokno said.

He noted that July 20 was a Philippine holiday, and local markets were closed, thus there was no live official data source for the spot market.

“The rule that we have is that on holidays the prevailing official rate will be the rate of the previous business day. In addition, we had observed various FX (foreign exchange) platforms such as Bloomberg and Reuters (which is what the BSP uses for market data sources) and none showed this drastic move.” 

The Bangko Sentral chief went on to say that monetary officials are suspicious that any big transactions were carried out at those rates since they would be considered “off market” and subject to internal reviews of these platforms.  

“For the reasons above we believe that the particular applications for USD/PHP pricing was caused by a pricing feed error, exacerbated by the Philippine holiday. That someone would be willing to trade at these off market prices using these apps can warrant further investigation.”

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