The accusation - that currency dealers were suspected of front-running customer spot and forward currency orders and then artificially manipulating the widely-used foreign exchange benchmark WM/Reuters rates through an intricate collusion amongst bank dealers on prices that they would set before and during the 60-second windows when the benchmark rates on WM/Reuters are set.
The initial accusation arose from A Bloomberg investigation and report that came out in an article by Messrs By Liam Vaughan, Gavin Finch and Ambereen Choudhury Jun 12, 2013.
Read here for full article - http://www.bloomberg.com/news/2013-06-11/traders-said-to-rig-currency-rates-to-profit-off-clients.html
The main banks identified were - UBS, Royal Bank of Scotland, JPMorgan, Citigroup, HSBC and Bank of America and resulted in huge fines.
Read here for a full article -
http://dealbook.nytimes.com/2014/11/12/british-and-u-s-regulators-fine-big-banks-3-16-billion-in-foreign-exchange-scandal/?_r=0
It was discovered that several dealers at different banks amazingly had used private chatrooms on the internet to discuss their trades and manipulate the their rates.
In the United Kingdom, on 12 November 2014, the Financial Conduct Authority (FCA) determined to impose regulatory fines on several international banks totaling $1.7 billion on five banks for failing to control their ethical business conduct in their G10 spot foreign exchange trading operations, most specifically the following fines were imposed: Citibank $358 million, HSBC $343 million, JPMorgan $352 million, RBS $344 million and UBS $371 million.
In the USA on the very same day the Commodity Futures Trading Commission (CFTC) in coordination with the united Kingdom FCA imposed fines totalling $1.4 billion against the very same five banks for manipulation of, and aiding and abetting other banks’ attempts to manipulate the global foreign exchange benchmark rates WM/ Reuters for their own benefit. The CFTC specifically fined: $310 million each for Citibank and JPMorgan, $290 million each for RBS and UBS, and $275 million for HSBC.
Given, the scale of currency manipulation that was discovered the question begs as to whether currency manipulation still continues to this day in any other form through the largely unregulated currency markets. Moreover, since the large currency traders have already set a precedent case for currency manipulation, then how much more pertinent are these issues to the smaller scale trade who picks his platform, chooses his investments and then really doesn't comprehend that he is just a little fish in a vast ocean of larger fish where fish can and often do eat other smaller fish.
All the more reason for traders to be cautious and conservatively research their currency platform providers. if Refco and Man Financial went bust who else? They dominated the pits on the CBOT and CME before. And their forex trading platforms was at the forefront of retail forex trading. But the problem is that if you tie in with one service provider, you are literally stuck with a single counter-party and the pricing is always going to be skewed in favor of the provider albeit on a much smaller scale than the problem highlighted in the institutional trading currency market discussed in this article. Regulatory authorities whilst they try their best are always a step behind an incident and you do not want to be waiting years to receive a partial refund if a firm goes bust. Proper analysis of your provider is absolutely imperative.
Pieter Bergli - DeLoren Trust Holdings
Forex Market Education
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
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