While recent press reports indicated that FX dealers said that the BOE had discussed WM Reuters fix trading in 2012, BOE minutes and discussions from the BOE FX Chief dealers meetings just released confirm this. However,the minutes also include from a mid-2006 meeting that there was evidence of attempts to move the market during certain fix periods. Meetings in 2008 and 2009 also included this topic.
In addition, earlier reports indicated that some of the regulatory FX investigations include a review of option trading, particularly the attempts to defend or breach particular FX spot rates. The BOE meetings notes now show a discussion at a 2006 Group meeting that bank FX systems could be manipulated in such attempts. (Certain option position values can be dramatically effected by a particular spot rate at a particular time).
Thus these two issues were discussed at BOE meetings. Today the BOE suspended a staff member . While mentioning that there was no evidence of collusion by BOE employees regarding these issues, it was hinted that the suspension may be related to not raising these issues with the next level of BOE authority. The BOE also reported that the last of the FX Chief Dealers Group meetings was held in February 2013. A subsequent meeting was scheduled but never held.
This information indicates to us that the regulatory investigations into FX benchmark rates are continuing at full speed. If, in addition, there were attempts to manipulate spot rates to impact option positions, that would seem a more complicated investigation with less certainty of exposing any manipulation even if it did occur. This would more likely involve individual market actors without as clear a goal as a daily published fixing.
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