Currency Rate Rigging

According to Bloomberg currency rate rigging charges are coming by the end of the year with more to follow thereafter.

U.S. prosecutors are pressing to bring charges against a bank for currency-rate rigging by the end of the year, and actions against individuals will probably follow in 2015, according to people familiar with the probe.

Several foreign banks have suffered convictions in regard to currency rate rigging by their traders. If successful this will be the first conviction of employees of a US bank. Traders colluded in online chat rooms in order to rig and or have knowledge of rigging of the rates set by major institutions for major Forex trading pairs. This has been in the news for a couple of years.

How Does This Affect Me?

Every so often in the markets, people get greedy. They find ways to share privileged information in order to guaranteed and enhance their own profits. The losers in this business are first of all other traders. Every trade has a winner and a loser and if a Forex conspiracy is afoot you may be the loser despite all of your best efforts at being successful. The other losers are those who pay dishonest traders and institutions to trade their money. By setting rates a little up or down these institutions can profit more while dipping into the assets of their clients. When the system is rigged it can be hard to develop and maintain a successful trading strategy because the numbers always lie!

Insider Trading Scams

Forex scams are all too common. Luckily for the rest of us scammers often get sloppy and then they get caught. Such was the case reported by ABC News.  Pleading guilty in an insider trading scam were two Australians.

Lukas Kamay, who was working for the NAB, and ABS employee Christopher Hill were charged after an investigation uncovered a scheme which allegedly netted them nearly $7 million.

Twenty-six-year-old Kamay, based in Melbourne, used unpublished unemployment, retail and trade data obtained through Hill to trade in foreign exchange derivatives.

In this case the two men met at Monash University in Melbourne. Their collusion resulted in a seven million AUD Forex scam. Both have pleaded guilty. Sentencing is next month.

Cleaning Up Your Own Mess

Free and fair markets are critical to fair trade and business in general. Banks, trading houses and brokerages must police their own operations or jeopardize the Forex system. In fact, if a bank gets a bad reputation its clients may simply go elsewhere. It is the duty of these institutions to spot currency rate rigging, deal with it in house and repor it to authorities. This is happening now at Rabobank as it suspends two London traders.

Rabobank has suspended two London-based foreign exchange traders after an internal probe revealed breaches of the bank’s policies.

The Dutch lender’s move adds to a shake-out among global banks’ forex units in the past 12 months after regulators set their sights on major currency dealers.

Almost three dozen traders have been suspended, placed on leave or fired across a dozen banks in connection with internal reviews of the business, while a plethora of other traders has left voluntarily.

To the extent that these institutions police their own operations currency rate rigging will not happen. When they fail authorities step in and take over.