4pm fix investigation – regulators seem to have uncovered chat room collusion

Next steps? Banks likely to line up to be the first to tattle, to get the best deal with regulators

The passing year will remain in history as a dire one for the financial industry. First it was the Libor fixing rate, it was closely followed by the foreign exchange markets fixing probe and concluded (for this year at least) with investigations into the gold and silver markets fixing manipulations. However crazy it might seem, 2013 might have done bigger damage to the banking system’s credibility than 2008-9.

The latest flow of information comes from the Wall Street Journal that learned from sources that are close to the investigations by global regulators that there is evidence that senior London-based traders have secretly engaged in collusion practices to improve the performance off their currency trading desks. According to the report the evidence comes from a series of instant messages in chat rooms.

The traders did indeed work together as a wolf-pack – taking their clients’ orders and sharing them with their fellow competitor traders in order to try and manipulate the foreign exchange rates around the fixing in London to their mutual advantage. Well that didn’t take too long, did it? But how did regulators get their hands onto this precious information?

The answer is held in a separate report by Bloomberg press – it turns out there are plenty of snitches. According to the report banks are scrambling to present information to the authorities hoping that regulators will in turn touch them with a softer hand. The report cites a person close to the EU’s preliminary investigation that banks are trying to copy the behavior of UBS and Barclays during the Libor fixing probe.

European authorities have been generous to the first one to betray their fellow competitors with a full discount and the second in line received a 50% discount on their fine. UBS and Barclay’s have avoided fines totaling about $4.4 billion when they valiantly admitted to their wrongdoings with the Libor rate.

Well the rabbit seems to be out of the hat now and we will certainly witness more juicy hearings with bank officials, while the public keeps bashing evil bankers for ruining their lives. Not a great financial system that we live in. All that’s left for us in the industry is to hope that there are no more rabbits in this hat, or pigeons for that matter!

For the full articles used in this report visit the websites of The Wall Street Journal and Bloomberg.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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