More bank manipulation - this time the forex markets

[David Guyatt]

Nothing new there then.

What would be different, if it were announced (and demonstrated) that the markets were honest, straight and clean.

But that ain't going to happen...

US And European Regulators Probing FX Market Rigging

Submitted by Tyler Durden on 10/11/2013 11:12 -0400

• Bloomberg News
  
• European Union
  
• LIBOR
  
• Reuters
  
• United Kingdom
  

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10 weeks ago we warned that the persistent "banging the close" action in FX markets warranted an investigation into market rigging and manipulation. It seems the US, Swiss, UK, and EU regulators have finally woken up:

• *U.S. SAID TO OPEN CRIMINAL PROBE OF CURRENCY MARKET RIGGING
  
• *SWISS, UK REGULATORS REVIEWING ALLEGED CURRENCY MARKET RIGGING
  
• *EU ANTITRUST REGULATORS SAID THEY ARE PROBING CURRENCY MARKET
  

Of course, gold and silver remain highly efficient and "clean" markets...

As we noted 2 months ago...
"Banging the close," is hardly a new 'event' but the ubiquity with which it is occurring around 4pm GMT (when major FX market benchmarks known as 'WM/Reuters rates' are set) is prompting authorities to investigate potential abuse of these benchmarks by the major banks. From Libor to ISDAFix and from base-and-precious metals to energy markets, adding the largest markets in the world - foreign exchange - to the banks' pernicious manipulations does not seem like a stretch. Critically, benchmark providers base daily valuations of indexes spanning different currencies on the 4 p.m. WM/Reuters rates (which in turn drives derivative settlements and triggers).

Stunningly, the same pattern - a sudden surge minutes before 4pm in London on the last trading day of the month, followed by a quick reversal - occurred 31% of the time across 14 FX pairs over 2 years, according to data compiled by Bloomberg. For the most frequently traded pairs, such as EURUSD, it happened about half the time! U.S. regulators have sanctioned firms for banging the close in other markets; we await the results of the current probe...

Via Bloomberg,
The U.S. Justice Department has opened a criminal investigation of possible manipulation of the $5.3 trillion-a-day foreign exchange market, a person familiar with the matter said. The Federal Bureau of Investigation, which is also looking into alleged rigging of interest rates associated with the London interbank offered rate, or Libor, is in the early stages of its currency market probe, said the person, who asked not to be identified because the inquiry is confidential.
...
The U.S. investigation comes as the U.K. Financial Conduct Authority said in June it was reviewing potential manipulation of exchange rates. That month, allegations that dealers at banks pooled information through instant messages and used client orders to move benchmark currency rates were reported by Bloomberg News. Regulators are probing the alleged abuse of financial benchmarks used in markets from oil to interest rate swaps by the firms that play a central role in setting them.
...
European Union antitrust regulators are examining the possible manipulation of currency rates, following a Swiss probe into whether banks colluded to manipulate the $5.3 trillion-a-day foreign exchange market. Joaquin Almunia, the EU's competition commissioner, said he learned in the last few days of activities that "could mean violation of competition rules around the possible manipulation of types of exchange rates," according to a live chat on the EU's website Oct. 7. ?
Aoife White and Gaspard Sebag?

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[David Guyatt]

Well I never. HSBC names itself.

HSBC Reveals Investigations Over Forex Trades

Sky News 9 minutes ago

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• View PhotoHSBC Reveals Investigations Over Forex Trades
  

Banking giant HSBC has confirmed it is being investigated in several countries over trading on the global foreign exchange market.
HSBC is the latest of a number of banks to confirm its forex business is being examined.
It said the investigations were at an early stage.
Last week the Financial Times said Barclays had suspended as many as six foreign exchange staff - some of them London-based.
It said that on October 31 RBS also suspended two of its traders as part of the probe.
Those banks declined to comment publicly on the suspensions but have confirmed they have been drawn into the investigation surrounding alleged manipulation.
HSBC confirmed that Britain's Financial Conduct Authority is one of a number of agencies investigating its currency trades.
A total of six global regulators have been involved in examining the sector, including watchdogs in the United States, Japan and Switzerland.
The news comes as HSBC saw its profit rise 10% in the last quarter, as cost cutting offset a drop in investment banking revenues.
HSBC reported an underlying pretax profit of £3.1bn for the three months to the end of September.

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