Foreign Exchange Market

New York regulator probing biggest foreign exchange trading banks

PUBLISHED : Thursday, 06 February, 2014, 3:45pm
UPDATED : Thursday, 06 February, 2014, 3:45pm

New York banking regulator Benjamin Lawsky is seeking documents from some of the biggest banks in foreign exchange trading, including Deutsche Bank, Goldman Sachs and Barclays, a source familiar with the matter said Wednesday, as a global probe into possible market manipulation widens.

At least seven other law enforcement offices and regulators internationally are investigating whether banks rigged the US$5.3 trillion-a-day currency markets.

Martin Wheatley, chief executive of Britain’s Financial Conduct Authority, said on Tuesday his watchdog group’s probe could extend into next year and that the allegations it is looking into are “every bit as bad” as in the Libor manipulation scandal.

More than 20 traders across Wall Street have either been put on leave, suspended or fired since the foreign exchange investigations were formally announced in October.

Deutsche Bank, the biggest foreign exchange trader in the world, fired three New York-based currency traders, a source said on Tuesday, and another in Argentina, a source said on Wednesday.

The probes are looking into whether senior traders at a handful of big banks colluded via online chat-room and messaging services to manipulate benchmark foreign exchange rates, or daily “fixings”.

These fixings are a cornerstone of global financial markets, used to price trillions of dollars’ worth of investments and deals and relied upon by companies, investors and central banks.

In Lawsky’s probe, more than a dozen banks have been asked for documents, including Barclays, Credit Suisse, Deutsche, Goldman, Lloyds Banking, Royal Bank of Scotland, Societe Generale and Standard Chartered.

Foreign exchange trading volumes have been falling in recent months, in part because of the probes.

On the Thomson Reuters dealing platform, daily spot foreign exchange trading volumes fell 11.5 per cent in December to US$92 billion, the lowest level since the company started tracking the data almost four years ago. Some of that decline may be due to dealers’ handling more of their trading in-house.

The top five banks in foreign exchange trading account for about 50 per cent of total volume, and the top 10, which also include Goldman, Credit Suisse, RBS and Barclays, account for almost 80 per cent.