A Peek Inside The Secret World Of Currency Manipulation

Tyler Durden's picture

We already know that Wall Street manipulates everything (not conspiracy theory, but now open conspiracy fact), but Reuters' Jamie McGeever exposes the ugly chatroom realities of just how FX traders shared orders, split trades, front-ran clients in million of electronic messages providing fresh evidence of collusion among top currency traders. Traders pooled order details and discussed the 'spread' they would offer, "I don't like this guy...I'd show 6 to good guys but guys like that I'm going to show 7 in future," the trader added. Unrigged?


To summarize just how, who and where this manipulation takes places is the following series of charts from Bloomberg demonstrating Wall Street at its best - breaking the rules and making a killing.

Foreign Exchanges

Regulators are looking into whether currency traders have conspired through instant messages to manipulate foreign exchange rates. The currency rates are used to calculate the value of stock and bond indexes.


Energy Trading

Banks have been accused of manipulating energy markets in California and other states.



Since early 2008 banks have been caught up in investigations and litigation over alleged manipulations of Libor.



Banks have been accused of improper foreclosure practices, selling bonds backed by shoddy mortgages, and misleading investors about the quality of the loans.


* * *

And in the latest news on manipulation, according to the FT, "The UK’s financial regulator is probing the use of private accounts by foreign exchange traders amid allegations they traded their own money ahead of clients orders, in a serious twist in the global probe into possible currency market manipulation. The Financial Conduct Authority has asked several banks to investigate whether traders used undeclared personal accounts, two people close to the situation said.

Guess what they found...

As Reuters explains, British investigators are examining millions of electronic messages which include fresh evidence of possible collusion by a small group of top currency traders, sources say.

The investigators have been handed chatroom transcripts showing senior dealers at the big banks that dominate the largely unregulated foreign exchange market routinely sharing intelligence on orders they were about to place for clients.


The traders pooled order details from hedge funds and discussed the prices they should be offered, said the sources, who have seen some of the messages at the centre of an international probe into alleged collusion in world foreign exchange markets.


In a chatroom transcript from April 2012, two traders discussed the "spread" that should be given to a certain hedge fund. The fund wanted a spread of five basis points on its foreign exchange order, but the first trader offered a spread of six.

A wider spread is effectively a less advantageous price to the customer, in this case the hedge fund, and a more attractive price to the market-making bank.

"I don't like this guy, as he's asking two or three banks at the same time," said the second trader in the chat, according to a person familiar with the contents of the transcript.


"I'd show 6 to good guys but guys like that I'm going to show 7 in future," the trader added.


The first trader then decided to quote a spread of 7 basis points, said the person familiar with the transcript.   

Of course, a swarm of senior FX traders have stepped down over the last few months...

Some 40 FX employees at many of the world's biggest banks have been placed on leave, suspended or fired as part of the global investigation - including one employee at the Bank of England - although no individual or institution has been accused of any wrongdoing.

...but regulators decline to comment on the ongoing investigation (which appears 100% cut and dried)...

Any evidence of collusion would be another blow to some of the world's largest banks, already hit by big fines and new regulations in the wake of world financial meltdown five years ago. The latest estimates by banking sector analysts of likely fines for such anti-competitive practices in the currency market now far exceed the $6 billion levied to date in the Libor interest rate rigging scandal – some by up to six times.


The chatroom transcripts from 2011 and 2012, which are in the hands of the FCA, are between three senior traders at three of the world's largest FX banks. All three traders have since been sanctioned to one extent or another by their banks, sources have told Reuters.


Between them the three banks account for around 30 percent of the $5.3 trillion global daily average turnover, according to Euromoney magazine.

So they represent at least 30% of the market - which given the momentum in FX means all of the market when they want to move it... Still believe in unrigged markets (and unicorns)?

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GreatUncle's picture



Reality is no longer avoidablde

kchrisc's picture

So true.

Hope they go peacefully, prepare to remove them--Pace spe para removenda.

"Si vis bellum para pacem--If you want peace, prepare for war"

max2205's picture

Having the British govt investigate anything is like putting the criminal investigate the criminal








........('(...´...´.... ¯~/'...') 


..........''...\.......... _.·´ 





UselessEater's picture

Even criminals like to thin out criminal competitors.

COSMOS's picture

Everything is rigged or someone is making more than a fair dollar off of you.  From getting your car worked on to your pension and investment funds.  Its like having a bunch of leeches attached to you from the moment you are born.

hungarianboy's picture

No wonder I lost a fortune trading FX,

R3ap3R's picture

When people are in debt and under pressure, morality is the least of their concerns

Kaiser Sousa's picture


thats step number 2...

Yen Cross's picture

  I don't need "a peek". I see it every fucking day.

Da Yooper's picture

oy vee shave a shekel here a shekel there who's going to notice     

LawsofPhysics's picture

Control the currency, you control the "price".

when no-one controls the currency, you might get a free market.

ergo, we have not had an even remotely "free market" for quite some time indeed.

Dr. Engali's picture

It's funny how all these traders can 'get away' with blatant manipulation without the 'knowledge' of the firm yet if I put a stock trade in a conservative account I get a phone call from compliance where they demand a written explanation signed in blood and notarized in the presence of a priest justifying why we made that trade...... Funny how that works.

HamRove's picture

the answer is simple....Laws apply to you. 

Their transgressions are incidental, and part of doing business.

They are highly skilled and educated productive members of society and therefore should have as much leeway as possible when breaking the law. 

They are better consumers becuase they have purchasing power and are therefore rewarded accordingly.

They are better than you in every way.

You are a unwashed useless eater. 

That's the gist of it. 

Dr. Engali's picture

Thanks for straightening me out about my position in life. But in the words of Staurt Smalley " I'm good enough, I'm smart enough, and doggon it people like me".

HamRove's picture

I hate to do it. Especially because it infuriates me to think about it.

+100 for obscure Stuart Smalley quote! :)

JR's picture

but but but…the economy is in "Serious Trouble."

No. 636: May CPI, Real Retail Sales and Earnings, Housing Starts June 17th, 2014

• When Understated Headline Inflation Generates Contracting Activity, the Economy Is in Serious Trouble, • Inflation More Than Wiped Out the Headline Gain in May Retail Sales • Inflation-Adjusted Earnings Fell for Second Month • May Annual Inflation: 2.1% (CPI-U), 2.1% (CPI-W), 9.9% (ShadowStats) • Housing Starts in a State of Volatile Stagnation • Second-Quarter GDP Contraction Should Follow in Wake of Continuing Downgrades of First-Quarter GDP Growth More ...

--John Williams'
"Shadow Government Statistics"

the wet spot's picture

It's official - Mankind is forever doomed to greed & courruption.  

JR's picture

"Gentleness is everywhere in daily life, a sign that faith rules through ordinary things...Even in a time of elephantine vanity and greed, one never has to look far to see the campfires of gentle people. Lacking any other purpose in life, it would be good enough to live for their sake." Garrison Keillor

--compliments today from Jesse's Café Américain

buzzsaw99's picture

crooked moneychangers are as old as the bible

Idaho potato head's picture

Perhaps even older, let the apocalypse begin!

Kaiser Sousa's picture

look lets keep this simple...

the entire global financial markets are rigged...

so, why do any of you out their believe you got a chance in hell of protecting your savings or wealth when you already know you aint in the "big club"...

why do any of you continue to expose yourselves 100% to counterparty risks associated with Wall St. and the MoneyChangers...

why wont you free yourselves and protect the financial interests of you and your loved ones by walking away from their fraudulent markets and debt based paradigm by accumulating real money in either form...

for fucks sake man, Silver just shoved above $20 per oz but the inflation adjusted price if not for the well known manipulation is what???? $400 to $500 per oz????


is that too much to ask.....


master bait's picture

Nothing is safe these fckers hacked my Coinbase account and took all my Bitcoins and no recourse on the deal, fck it all, nsa, cia, jew, etc. backdoor scam.

shitco.in's picture

Did you have 2FA set up? 

JustUsChickensHere's picture

Ha  !!   2FA?  Using your phone number perhaps (like Gmail and Yahoo new accounts where it is mandatory) .... if so, now all your accounts with that 2FA phone number are absolutely tracked to your actual identity..  IRS via NSA anyone.

Try email etc, without 2FA such as GMX.com or other domain, via Tor or I2P on a 2nd hand laptop bought for cash and running Tails distribution of Linux... then you just MIGHT get some safety and privacy...

JR's picture

That's the way Jesse's Café Américain sees it.

As of today, Jesse says...

"I had taken my trading account down to effectively zero cash on this last move lower in the metals, especially in the last two weeks.  That was how sure I was that these market were grossly oversold. 

So this multiday move higher has been rewarding, and I thank God for it. I did take some trading positions off the table today to get back to a more 'comfortable' trading position. I do not touch my long term positions and try not to even think about them.

So what next?  Follow through is everything here. We have taken out some good resistance levels and some important moving averages as I show in a gold and silver technical chart below.

But we still have not taken out the big downtrend in gold. Silver as well.

Today was nice. It would have been nicer to have known why the metals moved so violently higher today, in what certainly turned into short covering. I have picked up almost no rumours from trading desk chatter today. That in itself is some information.

Price movement makes market commentary. I don't think the Fed's statement yesterday is what caused this, but it is the go to plug for those who have to say something. Anyone who thought the Fed would do anything else must be a tourist.

Tomorrow is stock option expiration.  The miners had a significant move higher today.  

There was no meaningful action in the Comex warehouses.  It is like watching a portrayal of some market in Madame Tussauds' Wax Museum.

I am leaning toward the unwind of commodity rehypothecation in China as is ZH, but it bothers me that so far it is all base metals being discussed. We know there is a lot of leverage in the precious metals. And as you know, these latest antics by the Pigmen and their Merry Pranksters with the sovereign debt of Argentina was a real stick in the eye for the BRICs.

So let's see what happens tomorrow. And let's enjoy today."

Yen Cross's picture

  Why do you think the CFTC fucked un-accredited retail F/X traders a few years ago? (No hedging>reduced leverage ratios> first in -first out> no CFD's)

  It had absolutely NOTHING to due with risk management, and everything to do with directional trading for the "buy/sell" side institutions. EBS/Reuters ect...

Robot Traders Mom's picture

It's almost comical that people bitch about Benghazi, Kim Kardashian, and all other mindless entertainment, while ignoring the fact that our real problems stem from a fraudulent, fascist monetary system run by a gang of thugs...Ignorance is bliss.


Dr. Engali's picture

I'm sorry, what were you saying? I was just watching a funny commercial on teevee.

Cthonic's picture

something about 75 CDC scientists being given prophylactic treatment for potential anthrax exposure

Urban Redneck's picture

The 1 gram dose of Cipro method will make someone wish they were dead for 6-8 hours, too bad none of the f/x desks have had a good anthrax scare..

Yen Cross's picture

  Thanks for the tip. I'll toss my supply of " Colon-Blow ® "

craus's picture

This must be hell if it exists. The innocent die from mad gunmen, friendly fire, casualties of war etc.

Whereas the filthy rich have to live with knowing others got away with more money than they did.

Their only consolation is they are better off than most of us. Have pity on them.

Itch's picture

That Reuters article has been expropriated...

EJCB's picture

Any idea who those three might be?

villainvomit's picture

Jail time ???? This shit has been going on for years and nothing. 

yeah.....kinda like kill a man, get life.  Kill a a thousand or a million, you are king.

Oh yeah....FYJD!

22winmag's picture

I'm warning you, 30 lashes with a wet noodle is next.


When the punishment is a small fraction of your stolen monies and no felony charges it's a no brainer. There is plenty of money left over for payoffs (and blow and hookers).

cdskiller's picture

Right now, they are doing what comes naturally in a casino. Punishing individuals won't do a thing. Close down the markets. Make the trades illegal. Take away their toys. Then, if they want to be criminals, they will risk spending the rest of their lives behind bars.

AdvancingTime's picture

The games central bankers are playing in supporting their and other currencies has reached a dangerous level, we may be in the "red zone". Currencies are important chips in the commerce of government and the business of running a country. History has shown that in the past both leaders and governments have fallen with the demise of their coin.

The volume of trades, the sheer magnitude of monies flowing back and forth across borders has become staggering. This area of finance has become the worlds largest casino, where players have the potential to quickly suffer staggering losses. More on this subject in the article below.


paicairopsret's picture

Anybody watching the ups and downs of the currency exchange rates is already aware of the manipulation. There are some things that simply and logically should not be allowed in speculative trading. It flies in the face of free market to play games with the means of fair trade. One more reason to eliminate the Euro and let each country manage it's own currency according to it's own particulare situation.

Wait What's picture

i'm starting to accept the riggedness of markets as a cost of doing business. if i really want it i'll pay the 'rigged price' margin, if not, they can trade amongst themselves to their heart's content. eventually that margin works its way down to zero and either the middlemen disappear or the market ceases to exist.