And you thought rate-fixing scandals were so last summer?
Bloomberg reports that traders at some of the world’s largest banks have been manipulating foreign-exchange rates by pushing through trades before the 60-second windows when the FX benchmarks are set.
When traders receive a large, market-moving order from a client, they have their own positions to consider. Not to worry though.
One trader with more than a decade of experience said that if he received an order at 3:30 p.m. to sell 1 billion euros ($1.3 billion) in exchange for Swiss francs at the 4 p.m. fix, he would have two objectives: to sell his own euros at the highest price and also to move the rate lower so that at 4 p.m. he could buy the currency from his client at a lower price.
He would profit from the difference between the reference rate and the higher price at which he sold his own euros, he said. A move in the benchmark of 2 basis points, or 0.02 per cent, would be worth 200,000 francs ($216,000), he said.
The practice — reportedly commonplace in the gently regulated, $4.7-trillion-a-day currency market — has been going on for at least a decade, according to the report.
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