As 4pm fix investigation continues, industry calls increase to change the way FX benchmarks are set
In yet another twist, yesterday’s Bloomberg piece titled “FX Dealers Said to Use Day Traders to Make Personal Bets” is shedding some light on the FX manipulation practices surrounding the 4 pm fix saga. The trio of authors have obtained information that currency dealers in London were leaking information about new orders to day traders who executed deals on their behalf.
That gives a whole new perspective into how hard it actually is for banks to track the trading actions of their employees who are willing to abuse their knowledge of real time and future market positioning. As we already suspected in our article exploring a new lawsuit related to the 4 pm fix manipulation, the ways of tracking suspicious behavior are limited. According to Bloomberg’s piece traders were using their mobiles and instant messages to communicate with outsiders, who worked on trading desks in the outskirts of London.
The information was obtained from two people familiar with the practices and as you might suspect they remain anonymous.
As banks are warning what trading at a fix carries additional risks, and as the probes into manipulation of foreign exchange markets continue, according to a Risk Magazine article questions are being raised now around the industry as to the justification to keep on using the rate at 4 pm London time as a reference point.
A fair question indeed, considering the fact that current technological advancements would easily allow asset managers and pension funds to use more transparent algorithms and get an average rate over a longer period of time as suggested in the article by David Woolcock.