Investigations into alleged manipulation of the currency market are multiplying every day. First Great Britain, Switzerland and the European Union, now the United States. The investigation into the largest (5300 trillion dollars a day), most fragmented and opaque of all squares has now become global.
Les Echos is trying today to summarize the stories under the lens of the investigators. It all started several months ago in the UK, when a large European institutional investor went to complain to a British regulator. Like many funds, it used Thomson Reuters benchmark exchange rates. And he had noticed anomalous movements before they were fixed. The impression he had was that the banks were systematically manipulating the reference exchange rates in order to make a profit.
The Bloomberg news agency, which first broke the story, had seen that the same movement was repeated over and over again on the 14 major currency pairs. On the last day of the month, a very important day for the markets, the performance of the currencies went up and shortly after they went down. It happened in 31% of cases in the last two years. An atypical recurring movement, which suggests some form of agreement, or at least an invisible hand.
The ongoing investigation will have to establish whether these manipulations are widespread, systematic and concerted, as happened in the Libor scandal.
The first information that is beginning to filter through suggests that these were not isolated cases. The Royal Bank of Scotland has handed over to investigators the communications of one of its former traders - now under JP Morgan - which suggest that he had gone far beyond the limits. In the course of their discussions, currency traders called each other "bandit club", "cartel". In addition to the recordings and communications between traders, the investigators will have access to exchange rate data, will do statistical analyzes and will try to understand if the movements are really anomalous.
Meanwhile, overseas, the American FBI has opened a preliminary investigation. All eyes are on the top four banks in the foreign exchange market (Deutsche Bank, Citigroup, Barclays, UBS) which together account for half of the world's daily volumes: $2650 trillion.
