November 1, 2013, 1:12 pm
Currency Traders Put on Leave Amid Investigation
By CHAD BRAY
LONDON — Nearly a dozen traders have been placed on leave at five large banks in recent days amid a wide-ranging investigation into potential manipulation of the foreign-exchange market.
Authorities in Britain, the United States, Switzerland and Hong Kong are investigating whether traders colluded to rig some areas of currency trading, a market that overall generates more than $5 trillion of trades daily.
In particular, they are looking at discussion logs in chat rooms between currency traders at various firms and whether those discussions corresponded with improper trading activity, according to people briefed on the investigation.
On Friday, two British banks, Barclays and Royal Bank of Scotland, both placed traders on leave amid heightened scrutiny by regulators, according to people briefed on the investigation.
Six traders were placed on leave at Barclays and two traders were placed on leave at Royal Bank of Scotland, these people said.
They join currency traders who were placed on leave at Citigroup, Standard Chartered and JPMorgan Chase in recent weeks. In many cases, the traders have been placed on paid leave pending the outcome of the investigation, according to people briefed on the matter.
On Tuesday, UBS said it had “taken and will take appropriate action with respect to certain personnel as a result of our review, which is ongoing.” However, the bank declined to say what those actions might be or whether anyone had been placed on leave.
All the banks declined to comment Friday, citing their policies not to discuss personnel matters.
The latest investigation is another distraction for banks in London, which have been dealing with the fallout from accusations that they manipulated global interest rate benchmarks, including the London interbank offered rate, or Libor.
Libor is used as a base interest rate for a variety of financial products and is also used to help set interest rates for mortgages, credit cards and other loans.
On Tuesday, the Dutch lender Rabobank agreed to pay more than $1 billion in criminal and civil penalties to settle investigations by British, United States and other authorities and admitted to criminal wrongdoing by its employees in manipulating Libor and other global benchmark rates. The bank entered into a deferred prosecution agreement, in which it will avoid criminal prosecution as long as it avoids further wrongdoing.
Barclays, UBS, R.B.S. and the British financial firm ICAP have paid more than $2.5 billion combined over the last year to settle accusations that they manipulated Libor.
Deutsche Bank, Citigroup and other large United States banks also remain under investigation in the Libor case. Yet it is unclear whether any American banks will face action in the case, people briefed on the matter have said.
Since last June, Britain’s Financial Conduct Authority has been looking into accusations of currency market manipulation. Last month, it said it was starting a formal investigation into the matter, which the authority has described as being at an “early stage.”
The Swiss Financial Market Supervisory Authority said in October that it was investigating several Swiss financial institutions in connection with possible manipulation of foreign exchange markets.
Regulators have been looking into allegations that traders rigged the so-called WM/Reuters rates and other benchmark currency rates, which are used by fund managers to calculate the value of their holdings as well as the FTSE Group and other stock-market index providers.
In part, they’re looking into a group of traders who were nicknamed by others as “the Cartel” and “the Bandits Club” and may have used those nicknames in their chats, according to a person briefed on the investigation.
Despite being one of the largest markets in the financial world, the foreign-exchange market is largely unregulated. More than 40 percent of all currency trades take place in London, by far the most concentrated market for such trades, according to industry figures.
In recent days, UBS, Deutsche Bank, Citigroup, JPMorgan, R.B.S. and Barclays have all acknowledged that they have undertaken their own internal investigations and been asked by regulators to turn over documents related to their foreign-exchange trading.
Urs Rohner, chairman of Credit Suisse, also told a Swiss newspaper last month that the bank had received inquiries from regulators but that it had found no evidence of manipulation so far in its own review.
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