Federal Reserve Involved in Rate Rigging Investigation
Reports have surfaced that the Federal Reserve is examining potential currency rigging by the world’s largest banks. The Fed authorities, along with investigators in London, are concerned with determining whether traders shared information to influence the foreign exchange market to generate higher profits for themselves. Bloomberg reported the investigation after being informed by an anonymous source.
Daily volume for the Forex market is approximately $5.3 trillion. The market has been under intense scrutiny as regulators around the world attempt to uncover potential market manipulations. Banks are taking notice, and changing how business is conducted. In December, Reuters reported that JPMorgan Chase & Co. (NYSE:JPM), and Deutsche Bank AG (NYSE:DB) were extending online chatroom bans. Chatroom transcripts were used in the Libor scandal investigations, and there is potential for their use in current Forex probes as well.
Benchmark rates are set daily during “the fix,” which occurs at 4 p.m. in London each day. Traders have a one-minute window where they can manipulate the rate depending on when they place orders–either before or during the timeframe. Transcripts could be used to see if bankers were collaborating on trade placement to influence rates. Citigroup Inc.‘s (NYSE:C) head of European spot foreign exchange trading, Rohan Ramchandani, was allegedly involved in one thread, (named “the Cartel”) which is currently under investigation. On January 10, Reuters contacted Citigroup spokesperson Danielle Romero Apsilos, who said Ramchandani “is no longer with Citi.” The spokesperson declined to comment regarding whether or not he had been fired due to the rate-rigging investigations.