Soft-touch FX regulation falls under harsh glare

By Jamie McGeever and Carmel Crimmins
Reuters
Friday, March 7, 2014

LONDON -- In July 2006, during lunch at an upmarket restaurant overlooking the sprawling Smithfield meat market in the City of London, Bank of England officials and senior bank dealers discussed evidence of potential manipulation of the foreign exchange market. People at the lunch said the attempts to move the market meant the process of establishing official prices -- known as "fixing" -- was becoming "increasingly fraught."

It was two years before the issue was discussed again, according to minutes from the meetings, released after a Reuters freedom of information request, and seven years before the Financial Conduct Authority, Britain's financial regulator, kicked off a global investigation and banks started to suspend or layoff traders.

The FCA probe focuses on whether traders used advance knowledge of customer orders to try and manipulate benchmark foreign exchange rates for their own gain, and is a blow to the "hands off" approach to regulating the world's largest financial market. ...

The fluid nature of FX markets suits governments and central banks which want the freedom to intervene in order to support their currencies. Many traders argue that itself amounts to market manipulation. ...

... For the full story:

http://www.reuters.com/article/2014/03/07/us-britain-forex-manipulation-...