Exploring the Latest Forex Trading Scandal

forex-trading-scandal

Exploring the Latest Forex Trading Scandal

Every day, the global foreign-exchange markets oversee the exchange of trillions of dollars’ worth of shares. Many of the world’s major currencies, including dollars, and euros, are traded in an environment that’s under-regulated, and often dominated by a specific group of elite banking professionals.

Lately, whispers around the security and performance of the foreign-exchange market have begun to grow louder, after regulators in Switzerland, Britain, and the United States have begun to accuse various international banks of manipulating the rates for specific exchange currencies. According to the unhappy regulators, a total of $3.4 billion in fines have been launched against financial institutions, including the Royal Bank of Scotland, UBS, HSBC, JP Morgan Chase, and Citibank.

JPMorgan Chase & Co. announced that they received a fine of around $400 million, while Citigroup Inc. claimed that they were given a charge of $600 million. Information about the fines for the remaining three UK banks is uncertain.

Outlining the Details of the Scandal

The US, Switzerland, and Britain regulatory bodies researched the performance of the banks mentioned above, and found that each had failed to offer appropriate training for foreign currency traders in their employment. The result of this lack of training meant that traders were able to start forming groups that could manipulate the market based on shared financial data.

Regulators believed that the accused manipulation of the market took place between the first of January in 2008, and the 15th of October 2013. The current bodies involved include:

  • The US Department of Justice
  • The US Commodity Futures Trading Commission
  • The Swiss Financial Market Supervisory Authority
  • The Switzerland Competition Commission
  • The UK Serious Fraud Office
  • The UK Financial Conduct Authority (FCA)
  • The Hong Kong Monetary Authority

The Dangers of Market Manipulation

The scandal touched on the Bank of England early in 2017, when the group chose to suspend an employee and begin a company-wide investigation examining countless emails and chat room records, alongside hours of telephone recordings for any sign of rate discrepancies. According to the results of the investigation, the chief foreign currency dealer for the bank of England was aware that bank traders were sharing information since at least the 16th of May 2008. Though he had concerns that there may be signs of “collusive behavior” as of November 28th 2012, the employee did not inform any of his superiors.

There’s a chance that the scandal might grow even larger in coming months, as investigations are launched into the potential manipulation of the LIBOR rate, which contributed to billions in potential fines for any bank involved. Because an evaluation of the Forex trading environment requires a thorough investigation into the integrity of the markets overall, there could be serious repercussions in the pipeline.

According to the finance professor for the University of Notre Dame, Jeffrey Bergstrand, continued development into the case could mean that stronger regulations are put in place for the trading market. However, such a change could be very difficult to implement. After all, we’d need to set up a strategy for coordination around the world.

The British Inflation Rate Slips for the First Time in 8 Years

The British Inflation Rate Slips for the First Time in 8 Years

The rate of inflation in Britain slipped below the official target of 2% during January 2017, for the first time since 2009. The fall means that it’s unlikely the bank of England will make any effort to raise interest rates again for the time being.

Official figures that were released during August showed that the consumer prices for interest were up by 1.9% in the year leading up to January, and down 2% from the rate in December. Experts predict that the drop may be a result of retailers choosing to slash their prices on tobacco, alcohol, and furniture-based products.

Assessing the Current Marketplace

The UK marketplace has been in a state of flux recently, following the Brexit results. According to the chief economist at “Markit”, Chris Williamson, the strong economic growth of the country, combined with the falling price of inflation has created a kind of “Goldilocks” set of circumstances.

Financial experts suggest that the policymakers working for the bank of England should be able to keep pushing the country forwards for a little longer thanks to low interest rates – driving a faster and more sustainable recovery for the economy.

Not so long ago, the bank suggested that their key interest rate would remain stuck at the record low of around 0.5% until joblessness throughout the country achieved a more solid solution. Once that unemployment threshold began to grow closer, the governor of the bank Mark Carney chose to update the forward guidance to broaden the range of indicators that would need to be considered before interest rates are raised.

For now, the low inflation numbers should ensure that the bank has all the freedom and versatility it needs to ensure the UK economy has room to thrive and strengthen before any of the current rates are changed.

Copyright Americas National Business and Investment Newspaper 2018
Shale theme by Siteturner