MassPRIM May Dismiss FX Partner BNY Mellon

(October 25, 2011) — The $46 billion Massachusetts Pension Reserves Investment Management (MassPRIM) has said it may drop BNY Mellon as its partner for foreign-exchange trading, Reuters has reported.

“We are testing the market to see what other options are available to us,” said Michael Trotsky, executive director of the fund, to the news agency. “We want to see if we can do a better job,” he added, saying that the scheme aims to interview a range of candidates this month to replace BNY Mellon after issuing a request for proposals. A decision could be made before the fund’s December 6 board meeting.

The news follows assertions by State Treasurer Steven Grossman, who claimed the custodial bank overcharged MassPRIM tens of millions of dollars on foreign exchange trading since 2000. BNY Mellon has denied the accusations. “We reject the notion that [MassPRIM] was ‘overcharged,’” the bank said in a statement. “We value our client relationships and are confident that we offer our clients and their investment managers competitive and attractive FX pricing.”

Custodial banks have battled heightened scrutiny in recent months. The top custodial banks in the United States — BNY Mellon and State Street — continue to fight claims that they took advantage of pension schemes when providing foreign-currency trading services in recent years. Earlier this month, aiCIO reported that State Street Global Markets’ (SSgM) Ross McLellan and Edward Pennings – global head of SSgM’s portfolio solutions group and head of the Europe, Middle East and Africa solutions group, respectively – left the company following a pension fund’s inquiries into fixed-income trading costs during a transition.