Forex traders face criminal inquiry

Mark Taylor: Traders could make millions in space of 60 seconds

The investigation into whether traders benefited from the manipulation of benchmark “forex” prices comes amid an existing probe by the Financial Conduct Authority and other regulators around the world.

They have been looking into whether currency traders shared information about their positions and knowledge of client orders through instant messages to rig the foreign exchange market in their favour.

Currency exchange rates are set on a daily basis by analysing trading volumes at leading banks during a short time window, the so-called “4pm fix”. It is thought that traders could potentially influence exchange rates by pushing through large orders during the 60-second window to make a profit.

Mark Taylor, dean of Warwick Business School and a former foreign exchange trader, said traders would only have to move the market a small amount for a short period to make millions for the banks.

“Collusion between traders to move the 4pm fix will be difficult to prove, but the chat rooms used by traders could be the key for investigators,” he added.

“These allegations have yet to be proved, but if the SFO does find them to be true, it will strike at the heart of business ethics. It would be yet another blow to the integrity of the banks.

“Our pension funds invest billions of pounds in the financial markets and if they are being cheated in this way, it affects every one of us.”

Royal Bank of Scotland has already said it has been contacted by the FCA over the issue and was “co-operating fully”, while Barclays and Lloyds have fired or suspended traders over the issue.