The #FXrigging scandal has resulted in yet another ‘Regulator Raid’ on global financial services. This time, with the Swiss Financial Market Supervisory Authority (Finma), joining the UK Financial Conduct Authority (FCA) and the US Office of the Comptroller of the Currency, (OCC) and Commodity Futures Trading Commission (CFTC) in grabbing cash that goes to national treasuries.
The nub of the story is that various nefarious groups within a consortium of banks sought to peg the 4PM London foreign currency (FX) Fix for their own purposes by collecting up customer orders to be put through around this designated time traditionally chosen as a currency mark for many global commercial contracts. As a home based FX trader, it is clear to me that the reaction of regulators and financial commentators to this shows just how messed up the regulation of the global financial system has become.
On the one hand, fining banks for misconduct and also increasing their capital ratios (the money they need to keep on hand to cover withdrawals, bad loans etc.), while drowning them in essentially 'free' Quantitative Expansion (QE) money and exhortations to lend more on the other, is sheer public policy madness. It’s contract-expand, get the bastard financiers, hypocrisy of the worst sort. A key question of this event is why, when even the simplest (retail web-based!) FX trading systems will show spikes caused by batched, volume or rigged 4PM trades surrounding the around the FX fix, were these market distortions not spotted earlier?
It seems strange that regulators can track and highlight suspicious insider equity trades down to the nearest 10,000 bucks in real time but neither they nor the bank's compliance teams spotted volume FX trades that nudged the 4PM fix in favour of vested interests. As a home-based, retail, FX trader myself these were obvious to me on several occasions during the last decade – although the 4PM fix was generally in of itself materially inconsequential to currency gains or loses on my own account. [NB: however, I am pretty sure that some trading stops I put in were blown out by these concentrated FX batched orders.]
In short, there is much more to this sorry episode than meets the eye, at first glance. At the very least regulators should be gunning for criminal INDIVIDUAL participants not weakening key INSTITUTIONS essential to the healthy future of the world's economy. So watch this space.
The nub of the story is that various nefarious groups within a consortium of banks sought to peg the 4PM London foreign currency (FX) Fix for their own purposes by collecting up customer orders to be put through around this designated time traditionally chosen as a currency mark for many global commercial contracts. As a home based FX trader, it is clear to me that the reaction of regulators and financial commentators to this shows just how messed up the regulation of the global financial system has become.
On the one hand, fining banks for misconduct and also increasing their capital ratios (the money they need to keep on hand to cover withdrawals, bad loans etc.), while drowning them in essentially 'free' Quantitative Expansion (QE) money and exhortations to lend more on the other, is sheer public policy madness. It’s contract-expand, get the bastard financiers, hypocrisy of the worst sort. A key question of this event is why, when even the simplest (retail web-based!) FX trading systems will show spikes caused by batched, volume or rigged 4PM trades surrounding the around the FX fix, were these market distortions not spotted earlier?
It seems strange that regulators can track and highlight suspicious insider equity trades down to the nearest 10,000 bucks in real time but neither they nor the bank's compliance teams spotted volume FX trades that nudged the 4PM fix in favour of vested interests. As a home-based, retail, FX trader myself these were obvious to me on several occasions during the last decade – although the 4PM fix was generally in of itself materially inconsequential to currency gains or loses on my own account. [NB: however, I am pretty sure that some trading stops I put in were blown out by these concentrated FX batched orders.]
In short, there is much more to this sorry episode than meets the eye, at first glance. At the very least regulators should be gunning for criminal INDIVIDUAL participants not weakening key INSTITUTIONS essential to the healthy future of the world's economy. So watch this space.
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