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The forex scandal is a financial scandal that involves the revelation, and subsequent investigation, that banks colluded for at least a decade to manipulate. The Libor-fixing scandal was unearthed after some journalists detected unusual similarities in the rates supplied by banks during the
It is made by taking an average of the exchange rate in currency trades 30 seconds before and after 4pm in the London market. The benchmark rate for a range of currencies—including major exchange rates like dollar-sterling, dollar-yen and dollar-euro—is used to value trillions of dollars of assets, and is the rate at which some big investors agree with their bank to exchange currencies to settle their accounts at the end of every day.
So, if the benchmark rate can be pushed up artificially, then the banks could charge their clients a higher rate than the rate at which the bank is able to cover the trade in the market a few minutes later, with the difference representing a profit for the bank. Some of the trades involved are huge — literally billions of dollars: if traders can move the benchmark rate just a tiny amount it could represent a profit of millions of dollars. That profit is not only good for the bank but for the trader as well, as their bonus at the end of the year will be decided on how much profit they have made, and that can run into millions of pounds.
That, though, is going to be hard to prove.
That is why regulators are sifting through thousands of emails and messages in the Bloomberg and Reuters chat rooms that traders use, to find evidence of collusion between traders. Deutsche Bank, Citigroup, Barclays, and UBS account for more than half of what is an opaque market with few regulations. Top-Jobs des Tages.
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Standort erkennen. Go to Homepage. Share on Xing. Share on LinkedIn. There are complaints that central banks are colluding to keep down the price of gold , a practice that allegedly extends to the Federal Reserve over its reporting of the amount of bullion held in its vaults. While this view is well outside the mainstream, there have been calls for a formal audit. One solution is to ensure the benchmarks are better designed.
In the summer, the International Organization of Securities Commissions, which represents global regulators, suggested policies to make sure that they were properly monitored and based on observable trades, rather than just on the perception of traders or market participants. Professor Mark Taylor of Warwick Business School thinks that the trading period used to measure foreign-exchange prices should be widened, making it harder for traders to game the system, and increasing the chances of any manipulation backfiring. The Libor scandal began in , with Barclays complaining about the rates that other banks were setting.
However, the story didn't hit the headlines until regulators took action last summer. However, other banks are under investigation, with more fines likely. The US Department of Justice is also looking to see if any criminal charges could be brought. Meanwhile, a number of civil lawsuits have been filed.
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Why is gold having such a miserable time and when will it turn around? And what should investors do now? Skip to Content Skip to Footer.
Features Home Currencies. What happened?
Is the entire currency market rigged? How does this compare with the Libor scandal? Will the banks be punished? Are there any other markets that could be rigged?