Hong Kong questions banks as FX market probe widens to Asia

Reuters

By Rachel Armstrong and Jamie McGeever

HONG KONG/LONDON, Oct 16 (Reuters) - Hong Kong is lookinginto allegations of price-rigging in the $5.3 trillion-a-dayglobal foreign exchange market as probes into possible currencyrate manipulation widen from Europe and the United States toAsia.

The Hong Kong Monetary Authority said on Wednesday that ithad spoken to foreign regulators and was speaking to banks aboutallegations that traders manipulated fixings, or snapshots ofwhere currencies are trading at a particular time in the24-hour-a-day global market.

Switzerland, Britain and the United States have alreadyopened investigations.

"The Hong Kong Monetary Authority is aware of theallegations. We have been in communications with the relevantoverseas regulators and following up with individual banks," thede facto central bank said in a statement to Reuters.

Switzerland's competition commission WEKO and its financialmarkets regulator FINMA said earlier this month that they hadopened investigations into potential manipulation of foreignexchange markets by banks. They did not name the banks underinvestigation. (ID:nL6N0HU17R)

Last week, a source familiar with the matter told Reutersthe United States was also involved in the probe.(ID:nL1N0I111N) Until now, no Asian authority has confirmed itis also involved in the investigations.

Royal Bank of Scotland (RBS.L) has already handed Britain'sfinancial regulator instant messages sent by a former currencytrader to counterparts at other banks, Reuters reported lastweek. (ID:nL6N0HZ2L6)

According to one banking source at one of the biggest FXbanks in the world, "every bank" has handed data and otherinformation over.

"It's a two-way flow of information," said a source at aU.S. bank, also one of the world's major FX institutions.

Media reports this week suggest the investigations centre onsenior traders at big banks who were part of electronicchatrooms with names such as "The Cartel" and "The Bandits'Club".

Senior traders at certain banks involved in this process arealleged to have shared information with each other ahead of thefixings, such as the size and nature of their clients' orders,in order to manipulate the fixing rate and make money.

Britain's Financial Conduct Authority has declined tocomment, as did Royal Bank of Scotland (RBS.L) and JP Morgan(JPM.N), while Citigroup's (C.N) chief financial officer JohnGerspach declined to comment during a conference call withreporters on Tuesday.

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