As had been rumored for a few weeks, FX settlements between multiple regulators and several FX banks were announced on the same day, today. The banks prefer not to be singled out for misconduct but just to be one of many, so that this is viewed as more of a market problem. The banks were not found to have attempted to manipulate FX rates but instead found to have had ineffective controls allowing traders to engage in manipulative behavior. However, the DOJ is still looking into criminal charges, the New York regulator would not sign on to this agreement as it was felt to be too weak and penalties against many other banks by these same and other regulators will be forthcoming.
The Swiss regulator FINMA also fined UBS for precious metals misconduct, finding "clear attempt to manipulate precious metals benchmarks", particularly in the silver market. As FINMA also fined UBS for FX market violations, UBS would certainly have wanted both announcements at once.
Then the Bank of England hopped onto the bad news train today as well. They have been quiet for several months after announcing that an unnamed employee had been suspended for misconduct regarding FX. Today they announced that the chief FX dealer had been fired yesterday, but still provided little information, other than misconduct was discovered as part of the FX manipulation probe but the behavior itself was not related to the probe.
Promotion of Ethics, Simplicity and Transparency in Finance
Showing posts with label gold fix. Show all posts
Showing posts with label gold fix. Show all posts
Wednesday, November 12, 2014
Thursday, July 3, 2014
UK's FCA Benchmark Manipulation Investigations - Let's Hope the Tortoise Wins the Race
Reuters reports the Financial Conduct Authority's head of markets infrastructure and policy testified before a Parliment committee on their benchmark investigations. None of his comments indicated that the investigations were moving very quickly.
On the possibility of collusion in setting the London gold fix the FCA stated "It is possible but I have no clear evidence that that has actually happened". The FCA fined Barclay's in May for a trader manipulating the rate in 2012 to avoid paying off on a client gold contract. Next month the industry is to report on whether the process meets new benchmark guidelines.
The FCA could provide the committee with no guidance as to when the FX benchmark investigation, which began a year ago, will reach a conclusion.
A committee member claimed that it is well known by equity traders around the world that closing stock prices are also manipulated. The comment from the FCA involved checking back to see if any action has been taken in this area. While we are not familiar with charges of equity price manipulation either, the incentive to do so is clear, as portfolios are valued using those levels.
All in all, the FCA gives the appearance of moving deliberately, and since these are complex charges, with huge amounts of data and conversations to review, the slow pace appears inevitable. More important than the timing, at the conclusion of these benchmark investigations, market participants' faith in the markets must be restored.
On the possibility of collusion in setting the London gold fix the FCA stated "It is possible but I have no clear evidence that that has actually happened". The FCA fined Barclay's in May for a trader manipulating the rate in 2012 to avoid paying off on a client gold contract. Next month the industry is to report on whether the process meets new benchmark guidelines.
The FCA could provide the committee with no guidance as to when the FX benchmark investigation, which began a year ago, will reach a conclusion.
A committee member claimed that it is well known by equity traders around the world that closing stock prices are also manipulated. The comment from the FCA involved checking back to see if any action has been taken in this area. While we are not familiar with charges of equity price manipulation either, the incentive to do so is clear, as portfolios are valued using those levels.
All in all, the FCA gives the appearance of moving deliberately, and since these are complex charges, with huge amounts of data and conversations to review, the slow pace appears inevitable. More important than the timing, at the conclusion of these benchmark investigations, market participants' faith in the markets must be restored.
Wednesday, June 11, 2014
GARP: Barclays Fined $44 Million by U.K. FCA for Gold-Fix Failings
Here's a great article from GARP reporting on the $44mm fine Barclays received from the UK's FCA for alleged manipulation of gold prices. What's next?
Thursday, May 15, 2014
London Silver Daily Fixing to End August 14 After 117 Years
Reuters reports that Deutsche Bank has postponed to August 14 its decision to drop out of the London Silver Market Fixing. In January Deutsche reported that as part of its retreat from much of the commodity business, it was going to sell its' memberships in the gold and silver fixes, run by five and three banks, respectively. They have not been able to sell either so far and announced that they will drop out of the processes on August 14. The London Silver Market Fixing Ltd. said that the fix will cease at that date. The possibility of another firm taking over the fix with replacement bank(s) remains a possibility, although this might be a difficult time to attract anyone to establish benchmark prices. The CFTC ended an investigation into the silver fix in 2013 without finding any wrongdoing.
Many lawsuits regarding the gold fix are currently in the process of being consolidated by the courts. There do not appear to be any lawsuits regarding the silver benchmark.
Many lawsuits regarding the gold fix are currently in the process of being consolidated by the courts. There do not appear to be any lawsuits regarding the silver benchmark.
Wednesday, March 19, 2014
UBS Announces Internal Investigation into Precious Metals Trading
The UBS annual report released Friday mentioned this as an outgrowth of their earlier begun FX investigation. A couple of interesting points:
1) The mainstream reports over the last year have referred to alleged gold price fix manipulation. Only 5 banks are involved in the benchmark rate setting process, and UBS is not one of them. Goldbugs, on the other hand, have screamed market manipulation (by banks holding down the price of gold) for years. While we are not gold market mavens, it appears difficult to believe that a long term strategy to hold down the market price of a commodity can be successful. However, if any manipulation is found at all, we can expect many more conspiracy theories to see the light of day (and manipulation reports over the last few years will make them all a bit more believable).
2) Since the LIBOR scandal, UBS has developed a reputation of being the first bank to investigate allegations of wrongdoing and the first to approach regulators when anything untoward is found, trying to reduce or eliminate penalties. Thus, this raises the question if once again, UBS is an early mover and additional precious metal trading investigations are to be begun.
1) The mainstream reports over the last year have referred to alleged gold price fix manipulation. Only 5 banks are involved in the benchmark rate setting process, and UBS is not one of them. Goldbugs, on the other hand, have screamed market manipulation (by banks holding down the price of gold) for years. While we are not gold market mavens, it appears difficult to believe that a long term strategy to hold down the market price of a commodity can be successful. However, if any manipulation is found at all, we can expect many more conspiracy theories to see the light of day (and manipulation reports over the last few years will make them all a bit more believable).
2) Since the LIBOR scandal, UBS has developed a reputation of being the first bank to investigate allegations of wrongdoing and the first to approach regulators when anything untoward is found, trying to reduce or eliminate penalties. Thus, this raises the question if once again, UBS is an early mover and additional precious metal trading investigations are to be begun.
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