After the outcry over the rigging of the LIBOR interest rates, allegations have surfaced that something similar has been going on in the currency market -- the biggest in the financial system. Britain’s main financial regulator is looking into the matter.
Rigging a market worth almost $5 trillion a day sounds impossible. But Britain’s Financial Conduct Authority seems to think it could have happened. The agency is looking into claims that key published foreign exchange rates may have been manipulated.
These rates are recorded during a 60-second trading window at the bottom of every hour. It’s alleged that dealers at some of the world’s biggest banks have timed their trades to coincide with this window, and, in doing so, have colluded with each other to influence the published rates.
Bloomberg's news service quotes an anonymous trader who says that moving a rate by only 0.02 percent could earn him a profit of more than $200,000. But millions of other people could lose out. The exchange rates -- allegedly manipulated -- are used as a reference point for trillions of dollars worth of deals around the world.