What Is Forex Scandal
The forex scandal (also known as the forex probe) is a financial scandal that involves the revelation, and subsequent investigation, that banks colluded for at least a decade to manipulate exchange rates for their own financial gain. Market regulators in Asia, Switzerland, the United Kingdom, and the United States began to investigate the $5.3 trillion-a-day foreign exchange market (forex) after Bloomberg News reported in June 2013 that currency dealers said they had been front-running client orders and rigging the foreign exchange benchmark WM/Reuters rates by colluding with counterparts and pushing through trades before and during the 60-second windows when the benchmark rates are set. The behavior occurred daily in the spot foreign-exchange market and went on for at least a decade according to currency traders.
Forex Scandal Effects
The monetary losses caused by manipulation of the forex market has been estimated to represent $11.5 billions-a-year for Britain’s 20.7 million pension holders alone (£7.5B/year). The manipulations affected customers all around the world, for over a decade. The manipulations’ overall estimated cost is not yet fully known.
Respective authorities have announced remediation programmes aimed at repairing trust in their banking systems and the wider foreign exchange market place. In the United Kingdom the FCA has stated that the changes to be made at each firm will depend on a number of factors, including the size of the firm, its market share, impact, remedial work already undertaken, and the role the firm plays in the market. The remediation programme will require firms to review their IT systems in relation to their spot FX business, as the banks currently rely on legacy technologies that allow for the existence of dark-data silos within which manipulation is able to occur unnoticed by compliance systems. In Switzerland the Swiss Financial Market Supervisory Authority has announced that for a period of two years UBS will be limited to a maximum annual variable compensation to 200% of the basic salary for foreign exchange and precious metals employees globally. UBS is instructed to automate at least 95% of its global foreign exchange trading, while effective measures must be taken to manage conflicts of interest with a particular focus on organisational separation of client and proprietary trading.
Forex Scandal Explained Conclusion
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