NO TRADING JULY 20

BSP says currency ‘flash crash’ was pricing feed error

The Bangko Sentral ng Pilipinas (BSP) on Wednesday said the supposed currency “flash crash” observed on Tuesday was a pricing feed error.

In a statement, BSP Governor Benjamin Diokno said that “the abrupt peso appreciation yesterday mentioned in the article was captured by the currency quotes from Google as well as certain social media platforms.”

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

The central bank chief made the clarification after House Ways and Means chairperson Joey Salceda urged the BSP to look into a “possible flash crash” observed on July 20, a holiday, when the Philippine peso appreciated to as high as P42.82:$1 from P50.54. 

“Yesterday, July 20, was a Philippine Holiday and domestic markets were shut. This means that there was no live official data source for the spot market,” Diokno said.

“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,” he said.

Salceda, in his statement, also said that Reuters’s Currency Rates and Bloomberg data show no signs of Philippine peso’s spike.

However, the lawmaker said some retail traders were indeed able to buy and sell dollars at the rates as low as P42.83.

“We believe that these applications that showed the drastic drop in the USD/PHP rate had an error in its source feed,” Diokno said.

“Moreover, we highly doubt that there were any material transactions dealt at those rates as these would definitely be ‘off market’ and would be subjected to internal reviews of these platforms,” the BSP chief said.

“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,” he said.

Nonetheless, Diokno said that if someone is willing to trade at the “off market” prices “can warrant further investigation.”