The Serious Fraud Office has launched a criminal investigation into alleged rigging of the pounds 3tn-a-day foreign exchange markets.
The move comes after about 15 authorities around the world said they were investigating allegations of collusion and price manipulation in the largely unregulated Forex currency market - which the Bank of
In a statement yesterday, the
The allegations, which have yet to be proved, are thought to centre around traders from rival banks using internet chat rooms to collude in the fixing of benchmark prices, which are used as reference rates for trillions of dollars of investment and trade globally.
Attention has focused on the benchmark price established at
"If some of the big players in the market got together and put through some very large trades - billions of dollars each - then that could affect the market, so they can charge their clients a higher rate before covering it a few minutes later to make a healthy profit. You only have to move the market a small amount for a short period, and that could be worth millions of dollars for the banks".
Unlike in the Libor-rigging scandal, where a few banks manipulated benchmark interest rates, foreign exchange traders cannot easily guarantee prices move in their favour as the market is so huge.
However, currency experts say that the market is heavily biased towards the professionals sitting on trading desks, who gain an edge by automatically receiving information far superior to that used by outsiders, and then trade using that advantage. Their advantage would theoretically be much greater if any of them colluded to share their information, or timed orders to suit their needs.
"Collusion and price fixing are a form of fraud . . . Financial crime must be taken just as seriously as any other form of crime. It is also right that this is being investigated under criminal law, which sends a strong message that banks, bankers and market participants are not immune."
The US department of justice and the
More than 20 individuals have either been suspended or fired from financial institutions as international regulators investigate allegations of rigging in the currency markets, while in March the Bank of
He said: "Individuals who participate in so-called 'rigging' and commit fraud have no place in financial markets and should be identified and punished accordingly.
"However, the actions of a small unrepresentative minority should not be seen to reflect the broader health of the industry, or trigger wider structural reform to what remains a highly efficient foreign exchange market. The goal of any probe should be to root out wrongdoers on an individual basis, rather than vilify banks".
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