How Banks Continue FX Rigging Right Under The SEC’s Noses

–  How Banks Continue FX Rigging Right Under The SEC’s Noses (ZeroHedge, Sep 16, 2014):

The good news is that the rigging of the FX markets – now conspiracy fact, not conspiracy theory – has, according to Bloomberg, forced the world’s biggest banks to overhaul how they trade currencies to regain the trust of customers and preempt regulators’ efforts to force changes on an industry tarnished by allegations of manipulation with the “modernization of processes that probably should have been brought in 15 or 20 years ago.” However, the FX market is far from ‘clean’ as Bloomberg notes, while banks can limit access to details about client orders on their computer systems, they can’t keep employees from talking to one another. Some traders also are still communicating with clients and counterparts at other firms via Snapchat, circumventing their company’s controls right under the nose of the SEC. As one trader commented, “these [reform] changes look like fig leaves.”

As Bloomberg reports, positive changes are happening (on the surface)…

The world’s biggest banks are overhauling how they trade currencies to regain the trust of customers and preempt regulators’ efforts to force changes on an industry tarnished by allegations of manipulation.

Barclays Plc, Deutsche Bank AG, Goldman Sachs Group Inc., Royal Bank of Scotland Group Plc and UBS AG, which together account for 43 percent of foreign-exchange trading by banks, are introducing measures to make it harder for dealers to profit from confidential customer information and take advantage of clients in the largely unregulated $5.3 trillion-a-day currency market, according to people with knowledge of the changes.

Banks have capped what employees can charge for exchanging currencies, limited dealers’ access to information about customer orders, banned the use of online chat rooms and pushed trades onto electronic platforms, according to the people, who asked not to be identified because they weren’t authorized to discuss their firms’ practices.

“This is finally bringing the FX market into the 21st century,” said Tom Kirchmaier, a fellow in the financial-markets group at the London School of Economics who specializes in the governance of banks. “What we’re seeing is a modernization of processes that probably should have been brought in 15 or 20 years ago.”

But, beneath the surface, nothing changes…

“The banks are very concerned about what the regulators are going to do, and this makes them look good,” said Colin McLean, founder and chief executive officer of SVM Asset Management Ltd. in Edinburgh, which oversees more than $900 million. “Maybe they think it protects them somewhat from future regulatory changes.”

While banks can limit access to details about client orders on their computer systems, they can’t keep employees from talking to one another. Some traders also are communicating with clients and counterparts at other firms via Snapchat, a mobile-phone application that sends messages that disappear, to circumvent their company’s controls, according to a person with knowledge of the practice.

Not everyone is buying the changes…

“For some of the more naive clients, there is still probably gaming going on by the banks because the incentives are there for doing so,” SVM’s McLean said. “These changes look like fig leaves.”

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The rigging continues…

1 thought on “How Banks Continue FX Rigging Right Under The SEC’s Noses

  1. There are good bankers….pictures available
    true duck story – San Antonio, Texas – Bravo
    Something really cute happened in this week. Michael R. Is an accounting clerk at Frost Bank and works there in a second story office. Several weeks ago, he watched a mother duck choose the concrete awning outside his window as the unlikely place to build a nest above the sidewalk. The mallard laid ten eggs in a nest in the corner of the planter that is perched over 10 feet in the air. She dutifully kept the eggs warm for weeks, and Monday afternoon all of her ten ducklings hatched.

    Michael worried all night how the momma duck was going to get those babies safely off their perch in a busy, downtown, urban environment to take to water, which typically happens in the first 48 hours of a duck hatching. Tuesday morning, Michael watched the mother duck encourage her babies to the edge of the perch with the intent to show them how to jump off. Office work came to a standstill as everyone gathered to watch.

    The mother flew down below and started quacking to her babies above. In disbelief Michael watched as the first fuzzy newborn trustingly toddled to the edge and astonishingly leapt into thin air, crashing onto the cement below. Michael couldn’t stand to watch this risky effort nine more times! He dashed out of his office and ran down the stairs to the sidewalk where the first obedient duckling, near its mother, was resting in a stupor after the near-fatal fall. Michael stood out of sight under the awning-planter, ready to help.

    As the second one took the plunge, Michael jumped forward and caught it with his bare hands before it hit the concrete.. Safe and sound, he set it down it by its momma and the other stunned sibling, still recovering from that painful leap. (The momma must have sensed that Michael was trying to help her babies.)

    One by one the babies continued to jump.. Each time Michael hid under the awning just to reach out in the nick of time as the duckling made its free fall. At the scene the busy downtown sidewalk traffic came to a standstill. Time after time, Michael was able to catch the remaining eight and set them by their approving mother.

    At this point Michael realized the duck family had only made part of its dangerous journey. They had two full blocks to walk across traffic, crosswalks, curbs and past pedestrians to get to the closest open water, the San Antonio River , site of the famed “River Walk.” The onlooking office secretaries and several San Antonio police officers joined in. An empty copy-paper box was brought to collect the babies. They carefully corralled them, with the mother’s approval, and loaded them in the container.. Michael held the box low enough for the mom to see her
    Brood. He then slowly navigated through the downtown streets toward the San Antonio River . The mother waddled behind and kept her babies in sight, all the way.

    As they reached the river, the mother took over and passed him, jumping in the river and quacking loudly. At the water’s edge, Michael tipped the box and helped shepherd the babies toward the water and to the waiting mother after their adventurous ride.

    All ten darling ducklings safely made it into the water and paddled up snugly to momma. Michael said the mom swam in circles, looking back toward the beaming bank bookkeeper, and proudly quacking.

    At last, all present and accounted for: “We’re all together again. We’re here! We’re here!”

    And here’s a family portrait before they head outward to further adventures….

    Like all of us in the big times of our life, they never could have made it alone without lots of helping hands. I think it gives the name of San Antonio ‘s famous “River Walk” a whole new meaning! Maybe you will want to share this story with others. Doctor York told me she had forwarded it to 20 people. It’s too good to lose!
    Live honestly, Love generously, Care deeply, Speak kindly & Leave the rest to God.

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