The Bangko Sentral ng Pilipinas (BSP) could look into the peso’s “flash crash” to P43:$1 from its P50-level on Tuesday (July 20), which was a holiday, and encountered a glitch or a “pricing feed error” from a foreign exchange (FX) trading app, said the BSP’s highest-ranking official.
“That someone would be willing to trade at these off market prices using these apps can warrant further investigation,” said BSP Governor Benjamin E. Diokno.
Diokno, responding to calls for a possible probe, assured the public that the “flash crash” was a Google-capture and it spread on social media. “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,” he stressed.
The BSP chief said FX platforms such as Bloomberg and Reuters – “which is what the BSP uses for market data sources” – did not show any “drastic drop.”
“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,” said Diokno.
Diokno said that while these apps showed a drastic drop in the exchange rate, it was a source feed glitch. “We believe that the particular applications for USD/PHP pricing was caused by a pricing feed error, exacerbated by the Philippine holiday.”
Since July 20 was a holiday, there were no domestic markets. “This means that 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,” explained Diokno.
On Wednesday, the peso closed at P50.35 from P50.34 last Monday, July 19.