Almost a month ago it had been reported in the press that the Bank of England had met with FX traders in 2012 and discussed the sharing of customer trade data before the WM Reuters fix at the London close. Now Bloomberg is reporting that they have spoken with three people with knowledge of what was discussed at the meeting, and with a person who has seen a trader's notes that were made immediately after the meeting and subsequently handed over to regulators as part of the investigation.
Bloomberg reports that according to these people,the officials from the BOE FX Joint Standing Committee were told by the bank traders that they shared their positions in order to net their positions ahead of the fix in order to avoid trading during the very volatile time of the fix. Reportedly the BOE representatives viewed this as a volatility reducing measure and did not bring the issue up to higher levels.
Of course, the concerns raised in the press relate not to netting of positions, but what allegedly occurred when there were sizable net positions on one side of the market. The BOE has issued little comment so far on what was discussed at the meeting. Details of the discussion will hopefully be forthcoming, but it appears to us that what has been released so far does not address whether or not there was misconduct or even whether the BOE was condoning the activities which are alleged in the press. However, in the event that misconduct is ultimately found to have occurred, a question will be whether the BOE acted appropriately.
BOE Knowledge of FX Position Sharing in 2012
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