Want to Rig FX, the World’s Biggest Market? No Problem.



Want to rig the world’s largest financial market?  No problem.

At least, that is what prosecutors in the U.S. and the UK are saying about their charges that three of the world’s largest global banks rigged parts of the $5.3 trillion a day foreign exchange market.

To give you an idea of how big this market is, the $5.3 trillion per day in trading volume dwarfs the equities and futures markets. According to a 2014 calculation, thirty days of trading on the New York Stock Exchange would equal one day of Forex trading.

In the latest episode of this huge, slow-motion felony that affected millions of unsuspecting investors worldwide and was covered on this website, Federal prosecutors are discussing ways for three U.K.-based traders to surrender to U.S. authorities so they can be prosecuted here and in the UK.  

The three traders worked in senior-level trading positions for Barclays, JPMorgan Chase and Citibank, some of the largest banks in the world. The three traders were charged in January with conspiring to rig exchange markets through discussions in an electronic chat room known as The Cartel, according to a Bloomberg news report.

The Cartel met online in a chatroom set up by a senior employee of the oil and gas firm BP Plc. (formerly British Petroleum). It included currency dealers at JPMorgan, Citigroup Inc., Barclays Plc, and UBS Group AG. 

The wheels of justice move slowly, and in some cases, not at all, but in this case, UK legal officials worked to cite the chat room messages between the currency traders and the UK’s largest energy company into a massive scandal that Bloomberg news said has enveloped 11 banks and forced over 30 traders from London to Singapore to lose or be suspended from their jobs. In November 2013, six banks were fined $4.3 billion for trading against their clients and conspiring to rig the foreign exchange markets.

If nothing else, the traders and their banks were ambitious.  The FX rigging scandal follows other scandals to rig the LIBOR, silver, and gold markets. If this is something the average [person cannot comprehend, don’t be surprised. 

These things happen when you have hundreds of well-paid traders with vast sums of trading money, massive computer networks, a lot of time on their hands, and best of all, get hundreds of thousands, and sometimes millions of dollars in bonuses for profitable trades they make for their banks. It doesn’t matter how they won; it just matters that they won. At least, that’s the official policy of the prevailing bank culture until they get caught.

So, as of this writing, it’s unclear if anyone will go to jail or if the banks will continue to use their institutionalized “get-out-of-jail-free” cards. Those cards worked wonders during the 2007 mortgage crisis, so there is no reason why they should not work just as well in 2017 in the US and with the Trump administration’s Justice Department and SEC in power.

Scandals like bid rigging also do wonders for individual investors’ confidence, so it is no wonder that the nation’s largest banks, such as Wells Fargo, should be concerned about whether their investors and customers trust them with their money. After these global scandals, would you?


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