February 07, 2014

The financial rot just keeps getting worse -- FX is FuXed, the Old Lady's in on the FiX, and the fight against the devil volatility goes on?

FT comes out with this tantalising flash of the gauntlet, at 4pm Friday:

The BoE representatives have on several occasions asked whether a particular currency fix can be manipulated, one member of the committee has told the Financial Times previously.

Bloomberg, being American and less subtle, loads up both barrels and lets fire, also at 4pm Friday:

Bank of England officials told currency traders it wasn’t improper to share impending customer orders with counterparts at other firms, a practice at the heart of a widening probe into alleged market manipulation, according to a person who has seen notes turned over to regulators.

A senior trader gave his notes from a private April 2012 meeting of currency dealers and two central bank staff members to the Financial Conduct Authority about six weeks ago because of mounting media coverage of the investigation, said the person, who asked not to be named while probes are under way.

Traders representing some of the world’s biggest banks told officials at the meeting that they shared information about aggregate orders before currency benchmarks were set, three people with knowledge of the discussion said. The officials said there wasn’t a policy on such communications and that banks should make their own rules, according to the people.

During a 15-minute conversation on currency benchmarks, traders said they used chat rooms to match buyers and sellers ahead of the fix to avoid trading at one of the most volatile periods of the day, the people said. That required them to share aggregate positions. They instigated the discussion because they were concerned that similar practices were under scrutiny at the time in the Libor investigations, the people said.

The Bank of England officials said they viewed the practices as positive to reduce market volatility and wouldn’t take the matter to the standing committee, according to the people with knowledge of the meeting. That body included a representative from the Financial Services Authority, the FCA’s predecessor, according to central bank records.

(My humble emphasis.) As a flat-out claim of a go-ahead for insider trading, it doesn't get any damning. Expect heads to roll. Names were named:

Dealers at the April 2012 meeting with Martin Mallett, the Bank of England’s chief currency dealer, and James O’Connor, who works in its foreign-exchange division, were told not to record the discussion or take notes, one of the people said. One trader wrote down what was said soon after leaving because of concerns spawned by investigations of attempted manipulation of the London interbank offered rate, or Libor, the person said.

And boom! I'm not sure what they call willfully avoiding the trail of evidence is, but that's close enough to establishing intent as makes no difference. Messrs Mallet and O'Connor are unavailable for comment (4-m, Friday) because they're trying to drag their lawyers out of some Threadneedle Street pub, one hopes.

It's enough to turn the crisis-weary public to Bitcoin. How on earth can regulators snub the nose at the blockchain when $5.8 billion of fines have been slapped on the Libor scandal, just ONE of the corruptions in the banking world?

Posted by iang at February 7, 2014 03:22 PM | TrackBack
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