FCA Faces Calls for More Disclosure on Currency-Rigging
By Gavin Finch, Suzi Ring & Sarah Jones - Dec 1, 2013 7:01 PM ET
The U.K.’s Investment Management Association, whose members oversee about 4.5 trillion pounds ($7.4 trillion) of assets, is pressing regulators to provide more information about the alleged manipulation of the foreign-exchange market, said two people with knowledge of the matter.
The trade group wrote to the Financial Conduct Authority in recent weeks, asking how it should respond to clients’ inquiries about whether currency markets are being rigged, said the people, who asked not to be identified because the correspondence is private. The FCA replied that it couldn’t comment on a current investigation, one of the people said.
The headquarters of State Street Corp., left, HSBC Holdings Plc, second right, and Barclays Plc, right, stand amongst skyscrapers in the Canary Wharf business and financial district of London. Photographer: Chris Ratcliffe/Bloomberg
Fund managers are among the biggest clients of banks’ foreign-exchange desks and are at risk of being the biggest losers from any rigging of the $5.3 trillion-a-day market. The FCA opened a formal probe on Oct. 16, four months after Bloomberg News reported that some traders had pooled information about their positions with counterparts at other firms and tried to manipulate the benchmark WM/Reuters rates.
“We deserve to know which mechanism is involved in any wrongdoing,” said Colin McLean, founder and chief executive officer of SVM Asset Management Ltd. in Edinburgh, which oversees about $970 million and is a member of the IMA. “Even very small errors or issues could involve large sums of money in absolute terms and that is why it’s a concern.”
SVM hasn’t been in contact with the IMA regarding currency rigging, nor has the firm been contacted by any regulator in relation to the probe, McLean said. Annette Spencer, a spokeswoman for the IMA, said the industry group had contacted the FCA about the probe, but declined to comment further. David Cross, a spokesman for the regulator, declined to comment.
The WM/Reuters rates are used by asset managers and index tracker funds to determine what they pay for currencies and to compute the day-to-day value of their holdings, and by index providers such as FTSE Group and MSCI Inc. (MSCI) that track stocks and bonds in multiple countries.
The rates are published hourly for 160 currencies and half-hourly for the 21 most traded. They are the median of all trades in a minute-long period starting 30 seconds before the beginning of each half-hour. Rates for less-widely traded currencies are based on quotes during a two-minute window.
The data are collected and distributed by World Markets Co., a unit of Boston-based State Street Corp., and Thomson Reuters Corp. Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing news and information as well as currency-trading systems.
The FCA is working with regulators including the U.S. Department of Justice and the Commodity Futures Trading Commission to investigate the market. At least 12 traders have been suspended and at least 11 banks, including New York-based Goldman Sachs Group Inc. and London-based Barclays Plc (BARC), have said they’ve been contacted by authorities.