SFO FX Investigation - Coverage Report 22 July 2014 · 7/22/2014 · bad as that in the separate investigation into efforts to rig the London interbank offered rate, or Libor, a

ACI Coverage Report

SFO FX Investigation

22 July 2014

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U.K. SFO Said Close to Opening FX-Rigging Invest igat ion Bloomberg By Suzi Ring 21 July 2014 U.K. prosecutors are preparing to open a criminal investigation into alleged manipulation of foreign-exchange benchmarks, a person with knowledge of the matter said. The Serious Fraud Office could announce the investigation as soon as this week, the person said, asking not to be named because the move isn’t public. Authorities around the world have been investigating whether traders rigged the $5.3 trillion-a-day currency market after the U.K. Financial Conduct Authority began a review last year. Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies. “ Indiv iduals who part ic ipate in so-cal led r igging and commit fraud have no place in f inancia l markets and should be ident i f ied and punished accordingly,” Marshal l Bai ley, who as president of ACI Internat ional represents people working in foreign exchange, said today. A cr iminal invest igat ion wouldn’t be “unexpected, g iven the sever ity of the al legat ions.” ‘Complex Data’ No firms or individuals have been accused of wrongdoing. UBS AG (UBSN), the fourth-biggest currency trader, has sought to reduce any potential punishment from U.S. and European Union authorities by cooperating with antitrust investigators and reporting on its own conduct in currency markets, people with knowledge of the matter said in February. Citigroup Inc. (C), Deutsche Bank AG (DBK) and Barclays Plc (BARC), the other top currency dealers according to Euromoney Institutional Investor Plc’s annual survey, have said they are cooperating with the foreign-exchange investigations. Spokesmen for Citigroup, Barclays, Deutsche Bank and UBS declined to comment on the probes. “We are receiving and examining complex data on this topic,” the SFO said yesterday in an e-mailed statement. “If and when we open a criminal investigation, that decision will be announced.” More than 25 traders have been fired, suspended or put on leave after the manipulation allegations emerged last year. Individual ‘Wrongdoers’



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“The goal of any probe should be to root out wrongdoers on an indiv idual basis, rather than v i l i fy banks,” ACI’s Bai ley said in an e-mai led statement. “The act ions of a smal l unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient FX market.” The Sunday Times reported earlier yesterday that the SFO is preparing to announce the investigation. While the FCA has taken the lead in probing the allegations in the U.K., the U.S. Department of Justice has been investigating possible criminal angles to the matter since last year. Prosecutors there could bring charges and levy fines in the case as soon as this year, a person with knowledge of the affair said last month. The SFO’s decision to wait to open an investigation of its own has prompted criticism from British lawmakers, who said the alleged offenses were similar to those found in manipulation of the London interbank offered rate, or Libor. The Bank of England has also come under criticism from lawmakers in the currency-rigging affair. It suspended one employee and engaged an outside lawyer, Anthony Grabiner, to probe allegations central-bank officials condoned practices at the heart of the investigations. Grabiner has been contacting traders who attended a 2012 meeting of a BOE committee, according to two people with knowledge of the matter. The chief dealers’ subgroup would meet with central bank representatives a few times a year to discuss trends and issues in the market. Grabiner is looking into allegations that the officials condoned practices such as sharing impending customer orders with counterparts at other firms.



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Br ita in’s Ser ious Fraud Off ice Joins Extensive Foreign-Exchange Inquiry New York Times By Jenny Anderson 21 July 2014 Britain’s Serious Fraud Office, which investigates and prosecutes fraud and corruption, joined other global regulators on Monday in investigating accusations of abuse in the multitrillion-dollar foreign exchange market. The criminal inquiry will focus on accusations against various employees at banks and other financial institutions, according to a person briefed on the investigation but not authorized to speak publicly. The Financial Conduct Authority, a separate agency that regulates the financial services sector, has been investigating potential misconduct in the $5.3 trillion-a-day foreign exchange market since April 2013. Its investigation has broadened as it has collected information. Regulators in the United States and Britain have noted that deciphering the evidence they have collected has posed various challenges. For example, foreign exchange traders — like any group of traders — have their own vernacular. One American regulator said his office had to bring in “translators,” or traders who could help to decipher chat room messages. “It’s certainly slowed things down a bit,” he said earlier this year. More than two dozen traders on four continents have been placed on leave or fired as a result of internal investigations at several large financial institutions involved in foreign exchange trading, including Barclays and JPMorgan Chase. Citigroup and Deutsche Bank, two of the biggest companies in the foreign exchange market, have each fired employees as a result of their own investigations. The Bank of England has also suspended an employee as it continues an internal review into whether central bank officials knew of or condoned manipulation of the currency markets. Neither the banks nor any of the suspended or fired traders have been accused of wrongdoing by the authorities. David Green, head of the Serious Fraud Office, told The New York Times in June that it was receiving “extensive and complex” data regarding the manipulation of foreign exchange rates. Martin Wheatley, chief executive of the Financial Conduct Authority, has previously said the evidence looked as bad as that in the separate investigation into efforts to rig the London interbank offered rate, or Libor, a benchmark interest rate. That investigation has yielded billions of dollars of fines from banks over the last two years. Marshal l Bai ley, president of ACI Internat ional, the trade associat ion for the internat ional fore ign exchange markets, cal led for caut ion as regulators moved to reform potent ia l ly problematic markets. “The best form of regulat ion for a market l ike FX is sel f-regulat ion, because you wi l l never have a standardized set of regulat ions global ly,” he said. He cal led for efforts to “educate part ic ipants fa ir ly and uniformly with codes of conduct.”



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This month, the Financial Stability Board said it was preparing to recommend that the window for determining benchmark currency rates be widened, as part of a series of proposals to potentially reshape foreign exchange markets. A spokeswoman for the Serious Fraud Office declined to comment on the timing of the investigation and whether the office has sufficient funding. The office operates on a shoestring budget. At 38 million pounds, it is 7 percent lower than the £41 million it had in 2008-9 (Credit Suisse spent 169 times that on compensation in 2013). Recently, the fraud office needed to request an extra £24 million in so-called blockbuster funding to help pay for some of its complex investigations. “The S.F.O. has very limited resources. For large investigations, it has to obtain extra blockbuster funding,” said Barry Vitou, head of corporate crime and investigations at Pinsent Masons, a British law firm. Mr. Green has noted the challenges of going against companies with deep pockets. “Large banks have a legal spend approaching a billion,” he said in the interview in June. “If you look at the size of the white-collar criminal legal sector in London, it’s huge. That would suggest there is far more work out there than we are doing.”



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Foreign exchange trading faces SFO cr iminal invest igat ion The Guardian By Simon Goodley 21 July 2014 The Serious Fraud Office has launched a criminal investigation into alleged rigging of the £3tn-a-day foreign exchange markets. The move comes after around 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated currency market – which the Bank of England governor, Mark Carney, has suggested could prove to be a bigger scandal than the manipulation of Libor, which has cost investment banks billions of pounds in fines imposed by regulators. In a statement on Monday, the UK's anti-corruption agency confirmed: "The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market." The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally. Attention has focused on the benchmark price established at 4pm – ironically called the "fix" or the "fixing" – which is the price many clients request is used when they conduct foreign exchange trades, chiefly because it is considered to be transparent. Mark Taylor, the dean of Warwick Business School who was once a foreign exchange trader and senior economist at the Bank of England, said: "The manipulation of the 'London 4pm Fix' doesn't just affect banks and traders, but the man in the street as well, as it is our pension and insurance funds that could be swindled out of millions of pounds by this. "If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks". Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge. However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs. Iain Coke, head of financial services at the accounting trade body ICAEW, said: "Any allegation of the manipulation of foreign exchange rates further undermines confidence in banks and financial markets. Collusion and price fixing are a form of fraud ... Financial crime must be taken just as seriously as any other form of crime. It is also right that this is being investigated under criminal law, which sends a strong message that banks, bankers and market participants are not immune."



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The US department of justice and the UK's Financial Conduct Authority are among the numerous regulators from around the world that are investgating whether currency traders have rigged markets. More than 20 individuals have either been suspended or fired from financial institutions as international regulators investigate allegations of rigging in the currency markets, while in March the Bank of England suspended a member of staff in connection with its own review of the currency trading market. Much of the focus has centred on individuals in London, which accounts for a large part of the world's foreign exchange trade. Marshal l Bai ley, president of the f inancia l markets trade organisat ion ACI Internat ional, suggested that i f any cr imes are found to have been committed, they should be blamed on rogue indiv iduals rather than on the internal culture at any City inst i tut ion. He said: " Indiv iduals who part ic ipate in so-cal led 'r igging' and commit fraud have no place in f inancia l markets and should be ident i f ied and punished accordingly. However, the act ions of a smal l unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient foreign exchange market. The goal of any probe should be to root out wrongdoers on an indiv idual basis, rather than v i l i fy banks".



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UK SFO conf irms FX invest igat ion launch FX Week By Eva Szalay 21 July 2014 SFO becomes the latest authority to join the probe into alleged collusion in FX markets. The UK's Serious Fraud Office (SFO) has confirmed the launch of an investigation into allegations of market manipulation and collusion in currency markets, marking a new stage in the now year-old upheaval in FX markets. On Monday, the SFO said it "has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market", confirming reports over the weekend that the government body was considering the matter. The SFO's investigation will be headed by director David Green, QC, who exercises powers under the superintendence of the attorney general. Last year, the SFO charged 34 defendants who are currently awaiting trial, and it has conducted eight prosecutions against 18 defendants over the 12 months to 31 March 2014. The body has a successful conviction rate of 85%. The latest development comes hot on the heels of news that the US Department of Justice offered immunity to junior FX traders if they provided compelling evidence against their superiors. Market participants suggested at the annual FX Week USA conference last week that such a move was likely to indicate that US prosecutors have little concrete evidence to go on so far. The SFO launched an investigation into London Interbank Offered Rates (Libor) in July 2012, and it has brought charges against 12 individuals so far in connection with the case. The regulatory probe into currency markets started in April 2013, when allegations of collusion first surfaced, prompting the Financial Conduct Authority to initiate an investigation into trading patterns around the WM/Reuters currency benchmark. Since then, all major financial market regulators have joined the probe, including authorities in the US and Singapore. The investigation has resulted in the suspension of more than 30 people, some of whom lost their jobs. So far, no charges have been formally brought against any individuals, but the threat of becoming embroiled in the scandal has led to an exodus of senior people from banks. "The news of a potent ia l SFO invest igat ion into unethical behaviour in the FX markets is not unexpected, g iven the sever ity of the al legat ions. Indiv iduals who part ic ipate in so-cal led ‘r igging' and commit fraud have no place in f inancia l markets, and should be ident i f ied and punished accordingly. However, the act ions of a smal l , unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient FX market. The goal of any probe should be to root out wrongdoers on an indiv idual basis rather than v i l i fy banks," says Marshal l Bai ley, president of ACI Internat ional.



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U.K. Prosecutors Said Close to Opening Probe Into FX Rigging Washington Post 21 July 2014 U.K. prosecutors are preparing to open a criminal investigation into alleged manipulation of foreign-exchange benchmarks, a person with knowledge of the matter said. The Serious Fraud Office could announce the investigation as soon as this week, the person said, asking not to be named because the move isn’t public. Authorities around the world have been investigating whether traders rigged the $5.3 trillion-a-day currency market after the U.K. Financial Conduct Authority began a review last year. Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies. “ Indiv iduals who part ic ipate in so-cal led r igging and commit fraud have no place in f inancia l markets and should be ident i f ied and punished accordingly,” Marshal l Bai ley, who as president of ACI Internat ional represents people working in foreign exchange, said today. A cr iminal invest igat ion wouldn’t be “unexpected, g iven the sever ity of the al legat ions.” ‘Complex Data’ No firms or individuals have been accused of wrongdoing. UBS AG, the fourth-biggest currency trader, has sought to reduce any potential punishment from U.S. and European Union authorities by cooperating with antitrust investigators and reporting on its own conduct in currency markets, people with knowledge of the matter said in February. Citigroup Inc., Deutsche Bank AG and Barclays Plc, the other top currency dealers according to Euromoney Institutional Investor Plc’s annual survey, have said they are cooperating with the foreign-exchange investigations. Spokesmen for Citigroup, Barclays, Deutsche Bank and UBS declined to comment on the probes. “We are receiving and examining complex data on this topic,” the SFO said yesterday in an e-mailed statement. “If and when we open a criminal investigation, that decision will be announced.” More than 25 traders have been fired, suspended or put on leave after the manipulation allegations emerged last year. Individual ‘Wrongdoers’ “The goal of any probe should be to root out wrongdoers on an indiv idual basis, rather than v i l i fy banks,” ACI’s Bai ley said in an e-mai led statement. “The act ions of a smal l unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient FX market.”



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The Sunday Times reported earlier yesterday that the SFO is preparing to announce the investigation. While the FCA has taken the lead in probing the allegations in the U.K., the U.S. Department of Justice has been investigating possible criminal angles to the matter since last year. Prosecutors there could bring charges and levy fines in the case as soon as this year, a person with knowledge of the affair said last month. The SFO’s decision to wait to open an investigation of its own has prompted criticism from British lawmakers, who said the alleged offenses were similar to those found in manipulation of the London interbank offered rate, or Libor. The Bank of England has also come under criticism from lawmakers in the currency-rigging affair. It suspended one employee and engaged an outside lawyer, Anthony Grabiner, to probe allegations central-bank officials condoned practices at the heart of the investigations. Grabiner has been contacting traders who attended a 2012 meeting of a BOE committee, according to two people with knowledge of the matter. The chief dealers’ subgroup would meet with central bank representatives a few times a year to discuss trends and issues in the market. Grabiner is looking into allegations that the officials condoned practices such as sharing impending customer orders with counterparts at other firms.



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BRITISH PROSECUTOR JOINS EXTENSIVE FOREIGN-EXCHANGE INQUIRY Columbus CEO 21 July 2014 Britain’s Serious Fraud Office, which investigates and prosecutes fraud and corruption, has joined the stampede of global regulators investigating allegations of abuse in the multitrillion-dollar foreign exchange market. “The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market,” the office said in a news release Monday. A person briefed on the investigation but not authorized to speak said the inquiry was focused on allegations against various individuals at banks and other financial institutions. The Financial Conduct Authority, a separate agency that regulates the financial services sector, has been investigating potential misconduct in the $5.3 trillion a day foreign exchange market since April 2013. Its investigation has broadened as it has collected information. Regulators in the United States and Britain have noted that deciphering the evidence they have collected has posed various challenges. For example, foreign exchange traders — like any group of traders — have their own vernacular. One U.S. regulator said his office had to bring in “translators,” or traders who could help to decipher chat room messages. “It’s certainly slowed things down a bit,” he said earlier this year. More than two dozen traders on four continents have been placed on leave or fired as a result of internal investigations at several large financial institutions involved in foreign exchange trading, including Barclays and JPMorgan Chase. Citigroup and Deutsche Bank, two of the biggest players in the foreign exchange market, have each fired employees as a result of their own investigations. The Bank of England has also suspended an employee as it continues an internal review into whether central bank officials knew of or condoned manipulation of the currency markets. Neither the banks nor any of the suspended or fired traders have been accused of wrongdoing by the authorities. Martin Wheatley, chief executive of the Financial Conduct Authority, has previously said the evidence looked as bad as that in the separate investigation into efforts to rig Libor, or the London interbank offered rate, a key interest rate benchmark. That investigation has yielded billions of dollars of fines from banks over the last two years. Marshal l Bai ley, president of ACI Internat ional, the trade associat ion for the internat ional fore ign exchange markets, cal led for caut ion as regulators move to reform potent ia l ly problematic markets.



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“The best form of regulat ion for a market l ike FX is sel f-regulat ion, because you wi l l never have a standardized set of regulat ions global ly,” he said. He cal led for efforts to “educate part ic ipants fa ir ly and uniformly with codes of conduct.”



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UK to probe al leged r igging of g lobal currency market Business Day Live 21 July 2014 U.K. prosecutors are preparing to open a criminal investigation into alleged manipulation of foreign-exchange benchmarks, a person with knowledge of the matter said. The Serious Fraud Office could announce the investigation as soon as this week, the person said, asking not to be named because the move isn’t public. Authorities around the world have been investigating whether traders rigged the $5.3 trillion-a-day currency market after the U.K. Financial Conduct Authority began a review last year. Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies. “ Indiv iduals who part ic ipate in so-cal led r igging and commit fraud have no place in f inancia l markets and should be ident i f ied and punished accordingly,” Marshal l Bai ley, who as president of ACI Internat ional represents people working in foreign exchange, said today. A cr iminal invest igat ion wouldn’t be “unexpected, g iven the sever ity of the al legat ions.” ‘Complex Data’ No firms or individuals have been accused of wrongdoing. UBS AG, the fourth-biggest currency trader, has sought to reduce any potential punishment from U.S. and European Union authorities by cooperating with antitrust investigators and reporting on its own conduct in currency markets, people with knowledge of the matter said in February. Citigroup Inc., Deutsche Bank AG and Barclays Plc, the other top currency dealers according to Euromoney Institutional Investor Plc’s annual survey, have said they are cooperating with the foreign-exchange investigations. Spokesmen for Citigroup, Barclays, Deutsche Bank and UBS declined to comment on the probes. “We are receiving and examining complex data on this topic,” the SFO said yesterday in an e-mailed statement. “If and when we open a criminal investigation, that decision will be announced.” More than 25 traders have been fired, suspended or put on leave after the manipulation allegations emerged last year. Individual ‘Wrongdoers’



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“The goal of any probe should be to root out wrongdoers on an indiv idual basis, rather than v i l i fy banks,” ACI’s Bai ley said in an e-mai led statement. “The act ions of a smal l unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient FX market.” The Sunday Times reported earlier yesterday that the SFO is preparing to announce the investigation. While the FCA has taken the lead in probing the allegations in the U.K., the U.S. Department of Justice has been investigating possible criminal angles to the matter since last year. Prosecutors there could bring charges and levy fines in the case as soon as this year, a person with knowledge of the affair said last month. The SFO’s decision to wait to open an investigation of its own has prompted criticism from British lawmakers, who said the alleged offenses were similar to those found in manipulation of the London interbank offered rate, or Libor. The Bank of England has also come under criticism from lawmakers in the currency-rigging affair. It suspended one employee and engaged an outside lawyer, Anthony Grabiner, to probe allegations central-bank officials condoned practices at the heart of the investigations. Grabiner has been contacting traders who attended a 2012 meeting of a BOE committee, according to two people with knowledge of the matter. The chief dealers’ subgroup would meet with central bank representatives a few times a year to discuss trends and issues in the market. Grabiner is looking into allegations that the officials condoned practices such as sharing impending customer orders with counterparts at other firms.



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Cla ims of Forex r igging spark cr iminal invest igat ion: Ser ious Fraud Off ice looks into pounds 3tn-a-day market Scandal could be bigger than Libor, says Bank chief Hispanic Business 21 July 2014 The Serious Fraud Office has launched a criminal investigation into alleged rigging of the £3tn-a-day foreign exchange markets. The move comes after around 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated currency market – which the Bank of England governor, Mark Carney, has suggested could prove to be a bigger scandal than the manipulation of Libor, which has cost investment banks billions of pounds in fines imposed by regulators. In a statement on Monday, the UK's anti-corruption agency confirmed: "The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market." The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally. Attention has focused on the benchmark price established at 4pm – ironically called the "fix" or the "fixing" – which is the price many clients request is used when they conduct foreign exchange trades, chiefly because it is considered to be transparent. Mark Taylor, the dean of Warwick Business School who was once a foreign exchange trader and senior economist at the Bank of England, said: "The manipulation of the 'London 4pm Fix' doesn't just affect banks and traders, but the man in the street as well, as it is our pension and insurance funds that could be swindled out of millions of pounds by this. "If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks". Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge. However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs. Iain Coke, head of financial services at the accounting trade body ICAEW, said: "Any allegation of the manipulation of foreign exchange rates further undermines confidence in banks and financial markets. Collusion and price fixing are a form of fraud ... Financial crime must be taken just as seriously as any other form of crime. It is also right that this is being investigated under criminal law, which sends a strong message that banks, bankers and market participants are not immune."



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The US department of justice and the UK's Financial Conduct Authority are among the numerous regulators from around the world that are investgating whether currency traders have rigged markets. More than 20 individuals have either been suspended or fired from financial institutions as international regulators investigate allegations of rigging in the currency markets, while in March the Bank of England suspended a member of staff in connection with its own review of the currency trading market. Much of the focus has centred on individuals in London, which accounts for a large part of the world's foreign exchange trade. Marshal l Bai ley, president of the f inancia l markets trade organisat ion ACI Internat ional, suggested that i f any cr imes are found to have been committed, they should be blamed on rogue indiv iduals rather than on the internal culture at any City inst i tut ion. He said: " Indiv iduals who part ic ipate in so-cal led 'r igging' and commit fraud have no place in f inancia l markets and should be ident i f ied and punished accordingly. However, the act ions of a smal l unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient foreign exchange market. The goal of any probe should be to root out wrongdoers on an indiv idual basis, rather than v i l i fy banks".



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Cla ims of Forex r igging spark cr iminal invest igat ion: Ser ious Fraud Off ice looks into pounds 3tn-a-day market Scandal could be bigger than Libor, says Bank chief Kitco News 21 July 2014 The Serious Fraud Office has launched a criminal investigation into alleged rigging of the £3tn-a-day foreign exchange markets. The move comes after around 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated currency market – which the Bank of England governor, Mark Carney, has suggested could prove to be a bigger scandal than the manipulation of Libor, which has cost investment banks billions of pounds in fines imposed by regulators. In a statement on Monday, the UK's anti-corruption agency confirmed: "The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market." The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally. Attention has focused on the benchmark price established at 4pm – ironically called the "fix" or the "fixing" – which is the price many clients request is used when they conduct foreign exchange trades, chiefly because it is considered to be transparent. Mark Taylor, the dean of Warwick Business School who was once a foreign exchange trader and senior economist at the Bank of England, said: "The manipulation of the 'London 4pm Fix' doesn't just affect banks and traders, but the man in the street as well, as it is our pension and insurance funds that could be swindled out of millions of pounds by this. "If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks". Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge. However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs.



18

Iain Coke, head of financial services at the accounting trade body ICAEW, said: "Any allegation of the manipulation of foreign exchange rates further undermines confidence in banks and financial markets. Collusion and price fixing are a form of fraud ... Financial crime must be taken just as seriously as any other form of crime. It is also right that this is being investigated under criminal law, which sends a strong message that banks, bankers and market participants are not immune." The US department of justice and the UK's Financial Conduct Authority are among the numerous regulators from around the world that are investgating whether currency traders have rigged markets. More than 20 individuals have either been suspended or fired from financial institutions as international regulators investigate allegations of rigging in the currency markets, while in March the Bank of England suspended a member of staff in connection with its own review of the currency trading market. Much of the focus has centred on individuals in London, which accounts for a large part of the world's foreign exchange trade. Marshal l Bai ley, president of the f inancia l markets trade organisat ion ACI Internat ional, suggested that i f any cr imes are found to have been committed, they should be blamed on rogue indiv iduals rather than on the internal culture at any City inst i tut ion. He said: " Indiv iduals who part ic ipate in so-cal led 'r igging' and commit fraud have no place in f inancia l markets and should be ident i f ied and punished accordingly. However, the act ions of a smal l unrepresentat ive minor ity should not be seen to ref lect the broader health of the industry, or tr igger wider structural reform to what remains a highly eff ic ient foreign exchange market. The goal of any probe should be to root out wrongdoers on an indiv idual basis, rather than v i l i fy banks".



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Cla ims of Forex r igging spark cr iminal invest igat ion: Ser ious Fraud Off ice looks into pounds 3tn-a-day market Scandal could be bigger than Libor, says Bank chief TMCnet.com 21 July 2014 The Serious Fraud Office has launched a criminal investigation into alleged rigging of the £3tn-a-day foreign exchange markets. The move comes after around 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated currency market – which the Bank of England governor, Mark Carney, has suggested could prove to be a bigger scandal than the manipulation of Libor, which has cost investment banks billions of pounds in fines imposed by regulators. In a statement on Monday, the UK's anti-corruption agency confirmed: "The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market." The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally. Attention has focused on the benchmark price established at 4pm – ironically called the "fix" or the "fixing" – which is the price many clients request is used when they conduct foreign exchange trades, chiefly because it is considered to be transparent. Mark Taylor, the dean of Warwick Business School who was once a foreign exchange trader and senior economist at the Bank of England, said: "The manipulation of the 'London 4pm Fix' doesn't just affect banks and traders, but the man in the street as well, as it is our pension and insurance funds that could be swindled out of millions of pounds by this. "If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks". Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge. However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs.



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Foreign exchange trading faces SFO cr iminal invest igat ion InvestorHub 21 July 2014 Traders allegedly used chatrooms to collude in fixing benchmark prices, used for trillions of dollars of investment and trade The Serious Fraud Office has launched a criminal investigation into alleged rigging of the £3tn-a-day foreign exchange markets. The move comes after around 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated currency market – which the Bank of England governor, Mark Carney, has suggested could prove to be a bigger scandal than the manipulation of Libor, which has cost investment banks billions of pounds in fines imposed by regulators. In a statement on Monday, the UK's anti-corruption agency confirmed: "The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market." The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally. Attention has focused on the benchmark price established at 4pm – ironically called the "fix" or the "fixing" – which is the price many clients request is used when they conduct foreign exchange trades, chiefly because it is considered to be transparent. Mark Taylor, the dean of Warwick Business School who was once a foreign exchange trader and senior economist at the Bank of England, said: "The manipulation of the 'London 4pm Fix' doesn't just affect banks and traders, but the man in the street as well, as it is our pension and insurance funds that could be swindled out of millions of pounds by this. "If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks". Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge. However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs.



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Foreign exchange trading faces SFO cr iminal invest igat ion Mere News 21 July 2014 The Serious Fraud Office has launched a criminal investigation into alleged rigging of the £3tn-a-day foreign exchange markets. The move comes after around 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated currency market – which the Bank of England governor, Mark Carney, has suggested could prove to be a bigger scandal than the manipulation of Libor, which has cost investment banks billions of pounds in fines imposed by regulators. In a statement on Monday, the UK's anti-corruption agency confirmed: "The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market." The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally. Attention has focused on the benchmark price established at 4pm – ironically called the "fix" or the "fixing" – which is the price many clients request is used when they conduct foreign exchange trades, chiefly because it is considered to be transparent. Mark Taylor, the dean of Warwick Business School who was once a foreign exchange trader and senior economist at the Bank of England, said: "The manipulation of the 'London 4pm Fix' doesn't just affect banks and traders, but the man in the street as well, as it is our pension and insurance funds that could be swindled out of millions of pounds by this. "If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks". Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge. However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs.



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Documents

SFO FX Investigation - Coverage Report 22 July 2014 · 7/22/2014 · bad as that in the separate investigation into efforts to rig the London interbank offered rate, or Libor, a