Swiss Regulator Probes Banks Over Currency Manipulation
By Gavin Finch & Liam Vaughan – Oct 4, 2013 7:34 AM ET
Switzerland’s financial markets regulator said it’s investigating “several” firms over the possible manipulation of the $5.3 trillion-a-day foreign exchange market.
The Swiss Financial Market Supervisory Authority “is coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated,” the regulator said in a statement today. Domestic firms are among those being investigated, Finma said.
The Swiss Financial Market Supervisory Authority “is coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated.” Photographer: Simon Dawson/Bloomberg
The probe comes after Bloomberg News reported in June that dealers at banks pooled information through instant messages and used client orders to move benchmark currency rates. Britain’s Financial Conduct Authority said that month it was reviewing the allegations.
Authorities around the world are investigating the alleged abuse of financial benchmarks by banks that play a central role in setting them. UBS AG (UBSN), Switzerland’s largest bank, was among four firms fined about $2.6 billion for rigging the London interbank offered rate, the benchmark for more than $300 trillion of securities worldwide.
In today’s statement, Finma didn’t identify which firms it’s investigating or give details of the scope of its probe. Vinzenz Mathys, a spokesman for the Bern-based watchdog, declined to comment further. UBS spokeswoman Jenna Ward and Credit Suisse Group AG (CSGN) spokesman Marc Dosch declined to comment.
UBS advanced 0.3 percent to 18.51 francs ($20.51) at 12:50 p.m. in Zurich trading, while Credit Suisse gained 0.1 percent to 28.09 francs. Credit-default swaps on Credit-Suisse rose one basis point to 95 and UBS was little-changed at 86.5, according to data compiled by Bloomberg.
Britain’s FCA today reiterated its June statement saying it has been speaking to the “relevant” parties. The regulator has separately requested information from four banks including Frankfurt-based Deutsche Bank AG (DBK) and Citigroup Inc. (C), a person with knowledge of the matter who asked not to be identified said in June. The Hong Kong Monetary Authority said in a statement today it would “closely monitor” developments.
About four banks account for more than half of all trading in the foreign-exchange market, according to a May survey by Euromoney Institutional Investor Plc. (ERM)Deutsche Bank is No. 1 with a 15 percent share, followed by Citigroup with almost 15 percent and London-based Barclays Plc (BARC) and UBS, which each have 10 percent. Giles Croot, a spokesman for Barclays, Sebastian Howell, a spokesman for Deutsche Bank, and Jeffrey French at Citigroup all declined to comment.
Traders at some of the world’s largest banks sought to manipulate the WM/Reuters currency rates in their favor by pushing through trades before and during the 60-second windows when the benchmarks are set, five current and former dealers with knowledge of the practice said in June. Some dealers colluded with counterparts to boost their chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.
The WM/Reuters rates are used by fund managers 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. While the rates aren’t followed by most investors, even small movements can affect the value of what Morningstar Inc. (MORN) estimates is $3.6 trillion in funds including pension and savings accounts that track global indexes.
Traders said that because they agree to deal at the 4 p.m. WM/Reuters price, they have to push through the bulk of their trades during the window when the rate is calculate to minimize potential losses. That leads to a surge in trading volume, which can intensify any moves, they said.
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