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Forex Manipulation: Add It To The List

Posted by Larry Doyle on June 12, 2013 10:00 AM |

Is it possible to manipulate the largest market in the world, that being, the foreign exchange market?

Well, if it is possible to manipulate the setting of overnight interest rates (i.e Libor et al) impacting trillions of dollars of derivative contracts and the pricing of equities (i.e. via high frequency trading), we should not be surprised that those on Wall Street are also able to manipulate prices within the foreign exchange markets . . . . and have been doing so for a long time.

In what might only be defined as another nail in the coffin of free and fair markets, Bloomberg exposes the stench of this manipulative activity.

Let’s navigate and review Traders Said To Rig Currency Rates to Profit Off Clients,

Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

How does this happen?

In a market dominated by a mere handful of firms the oligopolistic practices of collusive price setting (i.e manipulation) and the unequal sharing of information reign supreme. These practices are elevated even further when regulators — and their political friends as well — are in bed with the industry.

Without addressing the core premise of regulatory capture as the outgrowth of the crony and corruptible relationship between Wall Street and Washington, this manipulative activity will never end but will simply find other means and markets to express itself.

Consumers, investors, and taxpayers may unknowingly continue to suffer as Uncle Sam’s rent-seeking market and economy gains a stronger foothold BUT trust and confidence in America will continue to wane.

Navigate accordingly.

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.



  • Peter Scannell

    LD, Exposing the mechanisms facilitating fraud is where I find your site invaluable.

    Here is another example of facilitating fraud that Sense on Cents has historically voiced concern. Naked shorting.

    SEC Nets Win in ‘Naked Short’ Case

    Bring back the up-tick rule and naked shorting virtually disappears!

    Fidelity Mulls Exit from Controversial Stock Lending

    And so should the practice of lending mom and pop’s stock to Wall Street Hedge Funds to cover their not so well dressed short positions.

    Fidelity has recently stated it is mulling an exit from controversial lending of mom and pop’s stock shares to those who are shorting the very stock Fidelity sold to mom and pop long.

    On top of that – Fidelity shares none of the profits they reap from lending mom and pop’s stock shares with mom and pop!

    At least they could spread the wealth a little.

    I wonder how long Fidelity will mull.

    You can’t make this shit up – stunning!

  • KD8

    Hopefully the recent criminal charges against those manipulating LIBOR will also be pursued amongst these traders and co-conspirators

  • Eddie

    And they may fix this the same way they’ve “fixed” prior issues, in fact the whole premise of setting libor and fx rates at a certain time was a short sighted solution to some special interest group who likely felt they were disadvantaged.

    The fact is stocks, bonds, futures and derivatives are agreements between two parties and no amount of regulation (except the one that states theft is illegal) should make you more complacent about your transaction with me but politicians and their cronies in the private sector are always more than happy to say they’ve fixed the problem.

    They’ll fix it alright, this is a case for free markets that are free of wrongheaded intervention and regulation…

    I am aware that will never happen though.

    • Peter Scannell

      3rd period, utterly transparent Eddie.

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