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Forex scandal

 

Forex scandal

Secret trading chatrooms

Don't want other numpty's in mkt to know [about information exchanged within the group], but not only that is he gonna protect us like we protect each other ...

 —[2]

The forex scandal (also known as the forex probe) is a financial scandal that involves the revelation, and subsequent investigation, that banks colluded for at least a decade to manipulate exchange rates for their own financial gain. Market regulators in Asia, Switzerland, the United Kingdom, and the United States began to investigate the $5.3 trillion-a-day foreign exchange market (forex) after Bloomberg News reported in June 2013 that currency dealers said they had been front-running client orders and rigging the foreign exchange benchmark WM/Reuters rates by colluding with counterparts and pushing through trades before and during the 60-second windows when the benchmark rates are set. The behavior occurred daily in the spot foreign-exchange market and went on for at least a decade according to currency traders.[3]

Contents

  • Investigation 1
  • Effects 2
  • Fines 3
  • Criminal proceedings 4
  • Reforms 5
  • See also 6
  • References 7
  • External links 8

Investigation

At the center of the investigation are the transcripts of electronic Citigroup’s head of European spot trading, Matt Gardiner, who joined Standard Chartered after working at UBS and Barclays, and Chris Ashton, head of voice spot trading at Barclays. Two of these senior traders, Richard Usher and Rohan Ramchandani, are members of the 13-member Bank of England Joint Standing Committee's chief dealers group.[8]

At least 15 banks including Barclays, Lloyds, RBS, Standard Chartered, UBS and the Bank of England as of June 2014 had suspended, placed on leave, or fired some 40 forex employees.[6][10][11][12] Citigroup had also fired its head of European spot foreign exchange trading, Rohan Ramchandani.[13] Reuters reported hundreds of traders around the world could be implicated in the scandal.[14]

Effects

The monetary losses caused by manipulation of the forex market has been estimated to represent $11.5 billions-a-year for Britain’s 20.7 million pension holders alone (£7.5B/year).[15] The manipulations affected customers all around the world, for over a decade. The manipulations' overall estimated cost is not yet fully known.

Fines

On 12 November 2014, the United Kingdom's

  • .
Government
  • .
UBS
RBS
  • .
JPMorgan
HSBC
Citigroup
Barclays
Bank of America

External links

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  17. ^ http://www.cftc.gov/PressRoom/PressReleases/pr7056-14
  18. ^ http://www.justice.gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas
  19. ^ http://www.fca.org.uk/news/fca-fines-five-banks-for-fx-failings
  20. ^ http://www.federalreserve.gov/newsevents/press/enforcement/20150520a.htm
  21. ^
  22. ^ http://www.occ.gov/news-issuances/news-releases/2014/nr-occ-2014-157.html
  23. ^ http://www.dfs.ny.gov/about/press/pr1505201.htm
  24. ^ https://www.fca.org.uk/news/fca-fines-barclays-for-forex-failings
  25. ^ a b
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References

See also

[31] In Switzerland the [30] The remediation programme will require firms to review their IT systems in relation to their spot FX business, as the banks currently rely on legacy technologies that allow for the existence of dark-data silos within which manipulation is able to occur unnoticed by compliance systems.[25] Respective authorities have announced remediation programmes aimed at repairing trust in their banking systems and the wider foreign exchange market place. In the United Kingdom the FCA has stated that the changes to be made at each firm will depend on a number of factors, including the size of the firm, its market share, impact, remedial work already undertaken, and the role the firm plays in the market.

Reforms

On 19 December 2014 the first known arrest was made in relation to the scandal. The arrest of a former RBS trader took place in Billericay, Essex, and was conducted by City of London Police and the Serious Fraud Office.[29]

Criminal proceedings

On 20 May 2015, the five banks pleaded guilty to felony charges by the wire fraud and agreed to a $203 million fine. A sixth bank, Bank of America, while not found guilty, agreed to a fine of $204 million for unsafe practices in foreign markets.[27][28]

The CFTC found that currency traders at the five banks coordinated their trading with traders at other banks in order to manipulate the foreign exchange benchmark rates, including the 4 p.m. WM/Reuters rates. Currency traders at the banks used private chatrooms to communicate and plan their attempts to manipulate the foreign exchange benchmark rates. In these chatrooms, traders at the banks disclosed confidential customer order information and trading positions, changed trading positions to accommodate the interests of the collective group, and agreed on trading strategies as part of an effort by the group to manipulate different foreign exchange benchmark rates. These chatrooms were often exclusive and invitation only.[26]

[26]

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