The Financial regulatory authority in Switzerland is investigating several banks on the possible manipulation of currency exchange rates.
“Financial Market Supervisory Authority shall coordinate actions with authorities in other countries could be involved as many banks globally. Institution will not provide further details on the investigation or the name of the banks involved,” reads a statement of the regulatory authority.
The announcement of the investigation came after reports in June that some banks and dealers have used client orders to move benchmark currency rates and used their influence to manipulate exchange rates in order to gain profits. This was risky business for the traders, but “If you need to buy €1 billion and you buy €2 billion, then you are jacking your rate higher against your client. But you are also leaving yourself with a billion on your books to get rid of at a rate the market can’t sustain, and good luck with that,” said one senior banker.
“Our expectation is that we will lose, not make money, on the fixes. They are extraordinarily unpopular with our sales and trading staff. If you are a trader, and you try to hedge yourself before the flows hit the market, people think you are front-running. If you trade during the one-minute fix window, people think you are banging the close [trying to affect fix levels]. If you try to hedge afterwards, you’re an idiot,” said another senior foreign-exchange banker.
A spokesman for the Financial Market Supervisory Authority refused to provide details on the investigation, and representatives of UBS and Credit Suisse could not be contacted.
Several EU officials in June asked UK authorities to investigate possible manipulation of exchange rates after reports in the press that traders have fixed for more than 10 years the currency markets benchmarks.
Dealers from some of the largest banks in the world have manipulated for more than 10 years the WM/Reuters foreign exchange reference indices, said at the time for Bloomberg five current and former dealers who had information about these practices.
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