Currency trading: Fixed penalty

ONCE again, a handful of the world’s largest banks have agreed to pay vast amounts of money to settle an investigation, this time concerning the manipulation of benchmarks used in the trading of currencies. American, British and Swiss regulators clubbed together to squeeze six banks for $4.3 billion between them. Yet more fines may be in the pipeline.The deal announced on November 12th follows a now familiar pattern: regulators release e-mails or instant messages they have harvested that indicate sleazy activity in an important market; banks issue statements that are contrite, emphatic about a commitment to moral values yet vague about what exactly occurred; no one charges any individuals with any crimes and lots of questions are left unanswered, including how the regulators calculated the penalties (Britain’s FCA being an honourable exception).The banks—UBS, Royal Bank of Scotland, JPMorgan, Citigroup, HSBC and Bank of America—were nabbed tinkering with the price of a widely used daily benchmark. Known as the WM/Reuters “fix”, it set prices for major currencies based on trades concluded during the 30 seconds either side of 4pm in London. The bankers involved diddled the fix to their own advantage. They colluded by sharing information about clients’ pending orders and adjusting their own prices accordingly. Easy profits and plentiful bonuses ensued. Losers included those…

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