A conglomerate of investors sued a banking cartel yesterday for supposedly colluding to arrange the outcomes and movements of the Forex market. The Forex market is the market that deals with foreign currency trading. These banks would have to pay billions of dollars in fines and compensations if found guilty.
Banking Cartel “Fixing” Forex
A group of investors directed by BlackRock Inc and Allianz SE’s Pacific Investment Management Co. sued a banking cartel yesterday for supposedly fixing movements by using market manipulation techniques in Forex markets. This announcement comes just days after the Goldman Sachs embezzlement scandal in Malaysia went public.
Forex is one of the most important investment markets out there. According to some sources, the forex market moves more than 5 trillion dollars each day at a worldwide level, so the scale of this demand is quite big.
The banks accused of colluding are Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Japan’s MUFG Bank, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered, and UBS.
All of these banks will likely face the same accusations in Europe. Most likely due to the fact that almost every institution on the list has offices in Europe as well.
How Did It Happen?
The manipulation was done in chatrooms called “The Cartel,” “The Mafia” and “The Bandits’ Club”. They put in practice techs called “front-running,” “banging the close,” “painting the screen” and “taking out the filth.”
Some of these banks have already accepted out of court arrangements. Citigroup’s arrangement for 402 million dollars out of court makes it the most expensive arrangement of this class. These actions have led banks to pay billions in fines, but the saga still continues with this new lawsuit. The claim states that:
“By colluding to manipulate FX prices, benchmarks, and bid/ask spreads, defendants restrained trade, decreased competition, and artificially increased prices, thereby injuring plaintiffs,”
Regulations For This Market
For some, it seems uneasy that some institutions are taking sides actively for their own profit. More so when their duty is to act as referees and intermediates. This new discovery will make regulators and enforcers be more vigilant. Forex is a market with high numbers, and it keeps growing every day.
Summarizing, this also shows that normal trading markets can be manipulated by their same promoters. And this will cause trust issues with possible investors in the future.