Courtesy of the revelations over the past year, one thing has been settled: the statement "Wall Street Manipulated Everything" is no longer in the conspiracy theorist's arsenal: it is now part of the factually accepted vernacular. And to summarize just how, who and where this manipulation takes places is the following series of charts from Bloomberg [6]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.
[7]
Energy Trading
Banks have been accused of manipulating energy markets in California and other states.
Libor
Since early 2008 banks have been caught up in investigations and litigation over alleged manipulations of Libor.
[8]
Mortgages
Banks have been accused of improper foreclosure practices, selling bonds backed by shoddy mortgages, and misleading investors about the quality of the loans.
[9]
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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."
Investors and foreign exchange traders have been speculating for a while that less scrupulous colleagues might have used private accounts at spread betting firms to gain advantages from their inside knowledge.
Hiding personal accounts is viewed as a clear breach of the rules. “If someone was [using a PA] to sell or buy ahead of the fix, I have no sympathy for him,” said one trader.
Personal accounts – or “PAs”, as traders call them – generally have to be declared to the bank and usually to a trader’s boss. Each individual trade then also has to be declared – often through an automatic email that is sent out when a trade is made.
Regulators are focusing their investigations on possible manipulation of a crucial benchmark, the 4pm WM/Reuters fix, in an affair that is echoing the Libor benchmark rate-rigging scandal.
Guess what they are going to find...