Traders Said to Rig Currency Rates to Profit Off Clients
Key Excerpts from Article on Website of Bloomberg News
Posted: June 18th, 2013
Traders at some of the worlds biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice. Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years. The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britains markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter. The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges. The WM/Reuters rates are used by fund managers to compute the day-to-day value of their holdings. While the rates arent followed by most investors, even small movements can affect the value of [the] $3.6 trillion in funds including pension and savings accounts that track global indexes.
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