It is a sign of the times that nobody reading this article will be shocked to learn of wrong-doing by major banks, nor that five major international banks have been fined a total of £2 billion for their parts in the shenanigans.
This time, the fines stem from manipulation of the Forex market, more specifically at the “spot fix” which provides benchmark values (the WM/Reuter’s benchmark, set in London at 4 PM each day) for the Forex market. The “Fix” is determined on actual buy and sell transactions in the interbank market in a sixty second window – 30 seconds before and after 4PM. It is used to set the values of 21 major currencies.
Traders from the five banks are alleged to have manipulated the markets by collusion through sharing sensitive information prior to the fix via message groups and “Banging the close” – delaying large buy or sell trades to take place during the window. If you know what major trades will take place to buy or sell a given currency, you can profit from knowing whether it is like to appreciate or fall at the fix. The “spot” forex market is said to be worth $2 trillion per day and the total forex market comes in at $5.3 trillion daily (these figures represent the value of the currency pairs being traded).
Three regulatory bodies, the Financial Conduct Agency (FCA, UK); the Commodity Trading Commission (USA); and the Swiss Financial Market Supervisory Authority (FINMA) have levied fines totalling £2 billion on HSBC, Royal Bank of Scotland (both UK based) JP Morgan Chase and Citibank (both US based) and Swiss bank UBS. The list is set to grow as the UK’s Barclays bank (for one) will be entering into arrangements with FCA to settle a fine over its conduct. Commenting on this matter, a Barclay’s statement dryly noted: "After discussions with other regulators and authorities, we have concluded that it is in the interests of the company to seek a more general coordinated settlement."
Both the FCA and the UK’s Serious Fraud Office have indicated that sanctions, possibly including criminal prosecution, will follow for those implicated to have played a significant role in this latest banking scandal.