The US Securities and Exchange Commission has joined a growing pack of the world’s financial regulators by opening an investigation into the alleged manipulation of foreign exchange markets.
The SEC is investigating whether forex traders’ actions had a knock-on effect on securities that were linked to currency prices, Bloomberg News reported yesterday.
Multinational companies use foreign exchange derivatives to hedge against unexpected changes in currency prices. About $15 trillion of foreign exchange options contracts are in operation, according to the latest figures from the Bank for International Settlements, an umbrella group of central banks.
The SEC declined to comment. The Financial Conduct Authority declined to comment on whether it was looking at securities as part of its forex-rigging investigation.
Mark Carney, the Governor of the Bank of England, will be questioned by MPs on the Treasury Committee today over allegations that Threadneedle Street was complicit in forex-rigging.
The scandal came to a head on Wednesday last week, when the Bank revealed that it had suspended an employee as part of an investigation into whether its officials were involved in manipulating currency markets. The Bank also began an internal inquiry headed by a law firm, Travers Smith.
The Bank said that it had not found evidence that staff were involved in rigging the markets. It has declined to identify the suspended individual.
In the US, the Commodity Futures Trading Commission, the Department of Justice, the New York Department of Financial Services, the Office of the Comptroller of the Currency and the Federal Reserve are known to have opened investigations into forex-rigging.
In Britain, the FCA and the Bank of England are investigating the allegations. The Swiss financial regulator, Finma, has opened an inquiry. Joaquin Almunia, the EU competition commissioner, said that the European Commission is examining the allegations.
The $5.2 trillion-a-day forex market is some 20 times bigger than the size of the worldwide stock market. More than 20 traders have been suspended since allegations surfaced that the WM/Reuters benchmark rate was being manipulated.
The fixed rate is based on currency trades made in a one-minute window every day. Some of the trades made in this window are believed to be suspect.