It was reported last week that The Financial Conduct Authority (FCA) is to launch an investigation into the global currency market. Due to their suspicions the City regulator has launched a formal investigation into the huge market which is said to be worth £3trillion per day.
Banks which have been contacted by the FCA include Royal Bank of Scotland, whose new boss Ross McEwan only look over this month, as well as a number of other major banks.
This is something which is likely to be on a similar scale as the Interest rate swap scandal which Slater and Gordon are already representing hundreds of businesses who were affected.
After gathering information over the last six months, the FCA has now joined with a number of regulators around the world to investigate the dealing activities of banks and their traders in a market that is regarded as the most actively traded anywhere in the world. The inquiries encompass a question whether the currency traders used advance knowledge to ring the foreign exchange fixings in their favour to influence rates for pricing portfolios and currency holdings. More than 40% of global forex trading is conducted in London which is why this is such an important issue within the UK.
Once the investigation has completed which the FCA warned could take several months, the people and organisations who may be guilty of the misconduct will face fines and bans.
A number of regulators have already launched formal investigations into the foreign exchange markets, including authorities in the US and the markets regulator in Switzerland. They are focusing particularly on the way that a benchmark used to price a wide range of currencies may have been manipulated.
A spokesman for the FCA said: "We can confirm that we are conducting investigations alongside a number of other agencies both in the UK and abroad into a number of firms relating to trading on the foreign exchange market.
"Our investigations are at an early stage and it will be some time before we conclude whether there has been any misconduct which will lead to enforcement action."
Traders are said to have sent instant messages to a group known as the Bandits' Club or the Cartel.
The investigation was fuelled by a report from Bloomberg news agency after it reported allegations that traders may have been able to influence the way currency benchmarks – used by fund managers to value their investments – were set.
The benchmarks, run by WM/Reuters, are based on prices during a 60-second trading window and it is suggested that traders were putting in client orders ahead of this crucial trading period.
The benchmark rates are published hourly for 160 currencies and half hourly for the 21 biggest currencies, including sterling, which are set by calculating the median price of trades taking place in a 60-second window.
Fraser Whitehead who heads up the team who dealing with the financial mis-selling at Slater and Gordon Lawyers commented that:
"This appears to be yet another example of market manipulation to benefit individuals or the businesses they work in at the expense of those who rely on them and had expected integrity rather than abuse. This simply must end. Unfortunately the announcement on an FCA investigation instils little confidence .The FCA has so far spectacularly failed to impress at delivering integrity in financial services and we cannot be optimistic that they will deliver for consumers and particularly ultimate consumers in this case with either any speed or effective redress. The story of interest rate swaps will likely be repeated and we should expect wait, wait, wait and then disappointment."