The allegations in this Bloomberg article reach new lows for fx traders. The story is that Lloyds had to sell a large amount of sterling for their own account. A trader notified a favored client beforehand so that the client could make money "front running" Lloyds' order. Not that allegations of collusion against clients' interests are acceptable, but the possibility that fx traders would harm their employers for self-enrichment (the article refers to getting future business from clients, learning about large trades in the future and maintaining relationships with other traders in the tight-knit trader community) raises the question of who was really running the trading desks - the traders or the banks?
Alleged activities in front of large orders, such as traders putting trades through their own accounts, notifying favored clients and traders at other banks so that those parties can front run the orders, if found to be true, may be a defense, albeit a weak one, for any banks found guilty of wrongdoing. Any bank claims of being unaware of improper activity may now seem a bit more plausible.
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