Foreign exchange markets rigged?

KyussBishop

Potentially mind-blowing discovery of fraud here:

Matt Taibbi wrote:

Given the LIBOR story, the Interest Rate Swap manipulation story, the Euro gas price manipulation story, the U.S. energy price manipulation story, and (by now) countless others of the "Everything is Rigged" variety, this screams out for immediate notice. Via Bloomberg:

Traders at some of the world's biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice . . .

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

This time the rates allegedly being rigged are in the foreign-exchange or "FX" markets, meaning that if this story is true, it would almost certainly trump LIBOR for scale/horribleness.

As one friend of mine who works on Wall Street put it, "It's endless! This is the biggest market in the world." Bloomberg suggested the story is just the tip of the iceberg:

"The FX market is like the Wild West," said James McGeehan, who spent 12 years at banks before co-founding Framingham, Massachusetts-based FX Transparency LLC, which advises companies on foreign-exchange trading, in 2009. "It's buyer beware."

The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges.

Again, more on this later. But the key thing here is the, uh . . . well, the consistent leitmotif of all these stories. One after another, it's the same thing: Insiders rigging benchmark rates, shaving money from basically everyone on earth, systematically and over periods of many years. It's the ultimate taxation-without-representation story – crazy stuff.

www.rollingstone.com/politics/blogs/taibblog/everything-is-rigged-vol-9-713-this-time-its-currencies-20130613

This is the guy who did excellent writing on LIBOR before; this new uncovering of fraud could dwarf that, and take over the record, as the biggest and most wide-ranging financial fraud in history.

Iwasfrozen

KyussBishop wrote: »

Potentially mind-blowing discovery of fraud here:

www.rollingstone.com/politics/blogs/taibblog/everything-is-rigged-vol-9-713-this-time-its-currencies-20130613

This is the guy who did excellent writing on LIBOR before; this new uncovering of fraud could dwarf that, and take over the record, as the biggest and most wide-ranging financial fraud in history.

Disgraceful. There needs to be a root and stem investigation of every major financial firm. Then protocols must be put in place to prevent this happening again.

Mr.Micro

How much more convincing do we need about the Financial institutions in the world, and all their cozy scams and cartel operations. We the public, are just the lemmings.

RMD

Iwasfrozen wrote: »

Disgraceful. There needs to be a root and stem investigation of every major financial firm. Then protocols must be put in place to prevent this happening again.

Problem is there isn't sufficient numbers out there to conduct a thorough investigation of the top-tier firms let alone every player in the market who could have any form of influence on the rates. They'll be able to go after the ones they suspect but to thoroughly investigate a €3.5 trillion market which is practically unregulated will be next to impossible.

Karl Stein

RMD wrote: »

Problem is there isn't sufficient numbers out there to conduct a thorough investigation of the top-tier firms let alone every player in the market who could have any form of influence on the rates.

They don't need to go after every single person. A couple of high profile manipulators (in a few countries), with their assets seized, being led away in handcuffs to face a prison stretch and the message goes out that you're going down and being made bankrupt if caught.

Will it happen? No. The game is rigged by design.

yore

Hmmmm. Haven't heard about this but doesn't seem plausible to be "rigged" in the sense that Libor was rigged.

Probably more akin to front-running than rigging rates. I don't think spreads would be narrow enough to profit from this systematically. Even given that the FX market is incredibly liquid (and I would think strongly efficient) for major currencies at least

laoch na mona

take a second to think about how the market system works, it is designed to be manipulated,

Karl Stein

laoch na mona wrote: »

the market system

Even calling it a 'market system' is very generous of you.

hfallada

WSJ had an article about how oil prices are constantly manipulated by traders. Only a few firms voluntarily disclose how much they paid for oil. So they sale a lot at low prices and small quantities and report it to the oil records firm. This causes oil prices to drop a few dollars on the markets. Then traders immediately buy a lot of cheap oil and then resale several days later at a higher price

Since its voluntary disclosure its not illegal

KyussBishop

hfallada wrote: »

WSJ had an article about how oil prices are constantly manipulated by traders. Only a few firms voluntarily disclose how much they paid for oil. So they sale a lot at low prices and small quantities and report it to the oil records firm. This causes oil prices to drop a few dollars on the markets. Then traders immediately buy a lot of cheap oil and then resale several days later at a higher price

Since its voluntary disclosure its not illegal

Yes there's a whole off-market trading practice going on with oil, which is arguably a large part of what is driving the problem with oil prices, because with all this off-market trading there is no transparency and nobody knows what the real prices are.

Nothing being done about any of this either, and it's one of the real causes of inflation for normal people (a good example of how many right-wing economic types decry any and every potential for inflation from government, and none from the private sector).

'Free markets' more often lead to a total lack of transparency (since none is enforced), thus distorting 'the markets' ability to determine real prices, and allowing oligarchic private speculators to control markets.

Jonny7

KyussBishop wrote: »

Nothing being done about any of this either, and it's one of the real causes of inflation for normal people (a good example of how many right-wing economic types decry any and every potential for inflation from government, and none from the private sector).

Something is being done, the EU anti-trust authority is currently investigating possible collusion
http://www.bloomberg.com/news/2013-05-27/oil-price-manipulation-may-affect-millions-eu-official-says.html

Scofflaw

KyussBishop wrote: »

Yes there's a whole off-market trading practice going on with oil, which is arguably a large part of what is driving the problem with oil prices, because with all this off-market trading there is no transparency and nobody knows what the real prices are.

Nothing being done about any of this either, and it's one of the real causes of inflation for normal people (a good example of how many right-wing economic types decry any and every potential for inflation from government, and none from the private sector).

'Free markets' more often lead to a total lack of transparency (since none is enforced), thus distorting 'the markets' ability to determine real prices, and allowing oligarchic private speculators to control markets.

"The freer the market, the freer the people" - but only the people who make the market.

cordially,
Scofflaw

Valmont

Scofflaw wrote: »

"The freer the market, the freer the people" - but only the people who make the market.

What do you mean by 'make the market'?

Scofflaw

Valmont wrote: »

What do you mean by 'make the market'?

Those market participants who individually have the capacity to influence the market.

For example, here, all of us do influence the forex market any time we exchange currencies, but those tiny transactions are only meaningful in aggregate, whereas individual traders trading substantial quantities have the capacity to influence the market on an individual basis.

cordially,
Scofflaw

Permabear

This post has been deleted.

20Cent

The ratings agencies are fixed also but thats not really a surprise.

The Last Mystery of the Financial Crisis
It's long been suspected that ratings agencies like Moody's and Standard & Poor's helped trigger the meltdown. A new trove of embarrassing documents shows how they did it


http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619

thebman

Well it is simple, with transparency comes more ethical behaviour.

They all want to operate behind closed doors to protect their "secrets".

Their secrets are most likely illegal/unethical. it isn't just with money that this happens. This is human nautre. With the ability to not have to disclose comes the ability to act unethically since you can justify it to yourself but you don't have to justify it to anyone else... Even if you have to justify it, only to your peers in your company, then group think occurs to justify it.