London forex dealers are texting client orders to day traders in nearby towns to make possibly illegal personal prop bets, Bloomberg’s Ambereen Choudhury, Liam Vaughan & Gavin Finch report.
The dealers would transmit details of the orders to individuals who’d rented trading desks in towns like Kent and Essex an hour outside London. The dealers also used instant messaging. Once armed with the clients’ positions, the day traders would make bets on currency directions, and would split any profits in cash with the dealers.
One of the sources said he’d witnessed a day trader hand over a cash-filled envelope to his corporate counterpart in the parking lot of an Essex bar. Bloomberg cites three unnamed traders who had witnessed the practice over the course of several years.
“[This] shows the extent to which dealers would go to circumvent rules designed to stop them from profiting at the expense of clients, and how alleged wrongdoing in the foreign-exchange market stretched beyond the trading floors of London’s financial district to unregulated day traders in Essex and Kent,” Bloomberg writes.
“It’s almost impossible for banks to have a lid on it — – unless they find a way of controlling all forms of communication out of the trading floor,” they quote Tom Kirchmaier, a fellow in the financial-markets group at the London School of Economics, as saying.
Bloomberg says regulators are already probing the issue. The practice echoes the rigging of worldwide benchmark interest rates through traders illicitly sharing their positions.