Adair Turner isn’t going to let the ‘socially useful’ mantra die. In the closing days of Davos he turned his social filter on FX trading (and the carry trade in particular), claiming that a big part of FX trading in London is “economically valueless” and serves, “no social purpose.”

Turner supports punitive capital requirements which will render carry trades unprofitable. He’s also fully approving of Brazil’s tax on capital inflows, imposed last year to deter investors from borrowing in low interest rate countries and buying into the Real.

None of this sounds particularly promising for the many FX traders in the City. According to the CEBR, there are around 11,000 people working in jobs related to ‘derivatives and FX’ in London, down from 16,500 in 2007.

Carry trades aren’t a big driver of FX volumes, accounting for an estimated $1.5 trillion annually, while average daily turnover in FX markets is more than $2 trillion. Rendering carry trades uneconomic might not destroy many jobs, therefore, but punishing purely speculative currency trades would. According to a report released last year by International Financial Services London, up to 95% of currency trading takes place for speculative purposes, and around 36% of global FX volumes come through London.

Thanos Papasavvas, a currency investor at Investec Asset Management, says Turner’s wrong in any case to say carry trades are bereft of broader value: “The carry trade performs an economic function by shifting capital from slow growing markets with low interest rates and lots of savings to fast growing markets.”

Morgan Stanley isn’t put off

Threats to curb FX trading don’t appear to be deterring Morgan Stanley from hiring.

Despite the bank saying two weeks ago that it had completed all but 50 of the 400 sales and trading hires it announced in August, James Gorman has told the Financial Times that Morgan Stanley needs to “seriously grow” its “footprint” in products like currencies, equity derivatives, commodities and could easily be 25% bigger.

The FT extrapolates from this that Gorman et al want to hire hundreds more traders.

One London FX headhunter says Morgan Stanley’s certainly hiring, but it’s not hiring that many people. He also points out that much of the hiring is global and not restricted to the City.

Turner-style restrictions, if imposed unilaterally in the UK, could push FX hiring into Asia. “FX is a global asset class. It can just as easily be traded in London as Singapore,” says Papasavvas.