Britain’s financial watchdog, Financial Conduct Authority (FCA), has said that it is gathering information on potential manipulation of benchmark foreign-exchange rates, amid new allegations that traders at banks are rigging rates to maximise profits.
The investigation centres around claims that bank staff are making trades before processing customer orders, and also timing them to influence the setting of benchmark rates, according to a report by Bloomberg News.
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Citing five dealers with knowledge of the practice, Bloomberg News said traders at some of the world’s biggest banks had manipulated foreign exchange rates.
While there are a range of players in the FX markets, four banks dominate the space – Barclays, Deutsche Bank, Citigroup and UBS. However, there is no suggestion any of the big four are involved in manipulation of FX rates.
"The FCA is aware of these allegations and has been speaking to the relevant parties. However, we cannot comment further at this time," a spokesman for Britain’s financial services regulator said.
The fresh allegations of market manipulation come nearly a year after Barclays acknowledged that some of its employees had tried to manipulate benchmark interest rates including the London interbank offered rate, or Libor. UBS and RBS also admitted that some of their staff also tried to rig interest rates and the three banks were collectively fined around US$2.5 billion.
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By GlobalData
Controls to move
Last week, reports emerged that the European Union may move Libor oversight to the European Securities and Markets Authority (ESMA) from UK, stripping London of its control over Libor lending rates.
Countries running Libor, Euribor or other "critical union benchmarks" would be under the direct supervision of ESMA, the FT reported, citing a draft copy of the European Commission’s proposal.
Though it may not be passed into law before next year’s European parliamentary elections, the FT report said the regulation is due to be published this summer.
