Andy Haldane highlights the risk of this, given that trading is occurring faster than human comprehension.3 One concern that the report highlights in this regard is whether PBs are adequately pricing the risk in the provision of their services.
This risk not only relates to the credit risk but also the potentially detrimental effect the PB customer may have on other parts of the bank’s business, either through spread compression or through reputational risk as the customer typically is trading in the PB’s name. Note that this issue applies to prime broking generally, not just to HFT in foreign exchange.