The investigations into alleged FOREX rate rigging have taken a new twist with revelations that investigators planted informants in various banks and convinced them to turn on their coworkers by secretly recording conversations and accessing other incriminating evidence. Now U.S. and British regulators stand ready to issue criminal indictments against traders suspected of collusion in manipulating FOREX markets.
Prepping the Fix
At 30 seconds before 4 p.m., a one-minute-long period known as the fix begins each day in the world of foreign currency trading. The significance of this one-minute period is that FOREX trades made during that time set the currency exchange rate benchmarks relied upon by global corporations, fund managers and investors worldwide to value contracts and other assets. Prices are checked, deals are completed, and the trading day has reached its zenith after just 60 seconds. But now allegations have surfaced that it was not only the firms client orders that were displayed on traders screens during that crucial period, but also those of competitors clients.
The Cartel, The Bandits Club and The Mafia
Apparently some traders held private chat sessions with names suggestive of less than orthodox trade chatting by which they exchanged information on each others client orders and agreed on how to trade at the fix. Both U.S. regulators and the UKs Financial Conduct Authority (FCA) are looking into allegations that FOREX dealers including those trading at major banks colluded with each other via the chat rooms in order to fix the fix.
Biggest Market Least Regulated
While sales of stocks and bonds that generally relate to pricing for a future date are highly regulated by government agencies, FOREX trading is a spot trade not considered to be an investment product and, therefore, is not subject to strict rules and regulations, although FOREX trading is a 5.3 trillion dollar-a-day market. According to former Delaware Sen. Ted Kaufman, This is a market where there is no law, and people have turned a blind eye. However, market laws regarding inside information and the sharing of confidential client information do apply to FOREX, and it is these laws that the suspect traders allegedly violated in their schemes to nudge the fix even slightly.
FBI Moles Inside Banks
Although it is not yet clear which banks may have been infiltrated with informants working for government agencies, the situation seems to have involved existing employees engaging their coworkers in exchanges conversationally and possibly electronically regarding criminal wrongdoing and then recording the disclosures. The targeted banks have not been identified; however 12 major banks control over 80 percent of the spot FOREX volume.
David draws on 20+ years’ experience in both legal practice and in business services delivery since his own call to the Bar in 1989. With several years in the startup environment, including as a co-founder in the legal tech space specifically, he brings a unique and timely perspective on the role of data, automation and artificial intelligence in the modern and efficient delivery of services for legal consumers. Having been both a corporate buyer of legal services and a services provider, he identifies the greater efficiency and value that can be achieved in legal operations for corporate buyers especially.
An attorney, David worked for law firms Pinsent Masons and Linklaters in London before moving to New York to join Credit Suisse. As CAO, he helped negotiate & execute the relocation of Credit Suisse into its new NYC global HQ. Subsequently, David directed major global outsourcing, shared sourcing, HR operations & process efficiency initiatives including the digitization of records, the global roll-out of PeopleSoft HRMS & Y2K. David has worked extensively in the UK, US, Philippines, India and China markets in the areas of data management, human resources and business process outsourcing.
Most recently, David has been successfully investing in and serving as an advisory board member of several legal services start-ups including a cloud-based solution for legal process automation and e-filing; and a technology solution for large-scale capture of court and other public data used for litigation analysis, among others.
David graduated from the University of Manchester with Honors in Law and Bar School (College of Legal Education) in London, and has been a member of Middle Temple since 1989. He is the founder and former Chairman of The Global Sourcing Council.
Member: Bar of England & Wales, ABA, NYCBA, ACC, DRI