Many of the charges in the FX manipulation media reports are possibly explicable as banks carrying on risk management before and during benchmark fixings. Without further details we do not know if there has been misconduct. However, the reports of collusion between major banks in the time period when London Close FX rates are established certainly means that, if true, the banks were involved in misconduct.
Now Reuters reports that the British regulator, the Financial Conduct Authority, has chat room transcripts of top traders from three large banks in London discussing the spreads to be put on specific, apparently large non-benchmark trades. If true, then collusion extended beyond benchmark trades to the general FX market as well. As allegations continue to come out from the FX and other markets, conspirators who have long alleged that banks controlled "the markets" are looking less and less crazy and leading some to wonder just how pervasive was misconduct. As reported here last week, estimates of regulator FX fines to come for banks are as high as $35 billion. Such magnitude is apparently effecting banks and recent reports have mentioned that banks are moving to further increase their proportion of electronic trading as there is less regulatory risk and less chance of misconduct on the part of traders.
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