Banks Say Forex Probes Could Change Industry
By Dan Fitzpatrick and Katie Martin
Representatives of several large global banks said in a private meeting last November that investigations into potential manipulation of foreign-exchange markets could result in changes to industry practices, according to meeting minutes posted on the Federal Reserve Bank of New York's website.
The disclosure comes as bankers and policy makers consider changing the way foreign-exchange benchmarks are calculated, or pushing clients to ditch benchmark-based trades, in response to global investigations into whether the vast market of foreign-exchange trading was manipulated.
The regularly scheduled Nov. 13, 2013 gathering of the Foreign Exchange Committee, which was hosted by J.P. Morgan Chase & Co., included 19 executives from firms including Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Barclays PLC and UBS AG. Six officials from the New York Fed were also in attendance, according to the minutes.
"Private sector members suggested that any investigations and/or supervisory activity related to this subject could eventually result in recommended changes to best practice guidance," according to the minutes. The New York Fed officials "would and could not address any investigations and/or supervisory actions" and didn't comment on "supervisory aspects of the behavior" outlined in recent media reports, according to the minutes.
The New York Fed, J.P. Morgan, Barclays, Bank of America and UBS declined to comment. Citigroup and Goldman Sachs couldn't be reached for immediate comment. Bloomberg News earlier reported the contents of the minutes.
Regulators in the U.S., U.K., Europe, Switzerland and Hong Kong started looking into possible efforts to manipulate the $5.3 trillion-a-day currencies market in early 2013.
This global regulatory probe has unearthed what some banks believe are indications that senior London-based traders frequently colluded to try to manipulate currency prices in order to maximize and minimize losses, according to people familiar with the investigations. Electronic chat-room messages appear to show what banks have feared: that traders from different banks shared information about client orders and agreed to a sequence for placing their own trades to their advantage, these people say.
Big banks, including UBS, J.P. Morgan, Barclays and Citigroup, have suspended at least a dozen traders in connection with the probe, according to people close to the banks.
The minutes show no drop-off in demand from clients for this type of trading, nor a decline in liquidity.
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