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The central bank suspended an official – concerns about FX fixing manipulation were first raised in 2005
Reuters is reporting that the latest suspension related to the foreign exchange fixing manipulation is not coming from the usual big forex dealing banking desk, but from the Bank of England. According to recent reports some staff members knew about the practices by major dealers and have refrained from reacting in any meaningful way. Apparently UK’s central bank has identified a culprit within its own ranks for the issue to remain unnoticed.
However 188 pages of minutes released by a Bank of England meeting dating all the way back to July 2005 are revealing that allegations of fixing manipulation have been raised quite a while ago. Despite the recently publicized investigation by the BoE of its staff members that found no proof that employees of the bank have been in some way involved by neglecting information, now we see a suspension. So what is really going at the headquarters of the Central Bank?
According to minutes from a meeting of the Foreign Exchange Joint Standing Committee Chief Dealers Subgroup, chaired by the Bank of England which are published on the UK central bank’s website, first mention of wrongdoings dates to July 2005. The document notes that evidence was noted of attempts to move the market around popular fixing times by players that had no particular interest in the fix.
The document proceeds that the events surrounding the fixing were not in the interest of customers, as the market was forced away from its normal behavior during the time when the fixing snapshot was taken. According to the document ‘fixing business’ was becoming “increasingly fraught due to this (prices) behavior”. The document clears out that quotes on the fixing price were quite rapidly unavailable to fill on the EBS/Reuters platforms at the time.
At the time the meeting was chaired by Martin Mallett from the Bank of England and he dismissed the issue as largely competitive. He proceeded to state that the issue should be addressed by the banks themselves to determine fixing methodology and option fixes expirations (which were also questioned). He proceeded to suggest that one of the big companies responsible for benchmarking, should present its fixing methodology to the Subgroup.
The Central Bank’s credibility is eroding at an alarming rate these days – not much can be done at this point in time to restore the public’s trust except further and tougher regulatory stance. One way or another the retail part of the business will be greatly affected by this – all we can do is hope it’s for the best.