The gray prices are not “impossible”. When a small client trades a small amount at a weird time of day they get the IB rate plus a spread. Easy to make that outside of the days range.

The pension funds “should” care. They should check rates. THey should ask for a better deal. Or an indexed rate or banchmark rate, all commonly available.

This is exposing the “easy” and expensive way.

he WSJ inflated the typical deal size to make a point. These deal sizes are small.

When forex settled, we would wire the money blindly to the counterparty, and pray that they would wire the amount we were due back. That was “clean risk,” a credit exposure. Nasty, hairy stuff. All around the world, with all kinds of counterparties, in Japan, Hong Kong, Africa, Europe.

And we had to hold capital against it. So, I was supposed to make markets against odd-lot players and quote them the round-lot price, because Reuters was giving away terminals? Not!

My clients were free to price my offering against the competition. And never, Never, NEVER did I discuss my offering price with my competitor. Even if I were so inclined, there would not be time.

FX is an OTC market. Very competitive, very fast. And the poor pension fund managers couldn’t be bothered to check the bid away? Please. The real scandal is that they charged a management fee for their crappy performance, not that the bank made money on a spread.

BTW, I’m with a small asset manager now. Too small to compete for a big bad pension fund like LA’s. Because the consultants never consider execution, just structure. And size. Bigger is always better. Again: not. Who was the manager? And who was the consultant who recommended them? Now there’s a story!