FX Fixing Scandal: Global Regulators Find Chat Room Evidence of Trader Collusion

The global investigation into the potential manipulation of the currency markets is tipped to be drawing to a close as regulators find evidence of traders colluding to rig rates.

According to a Wall Street Journal report, British, US, European Union and Swiss regulators have allegedly found electronic chat room messages that appear to show that traders from different banks shared information about client orders and agreed to sequence their own trades to take advantage.

Traders usually communicate in real time by using third-party run chat functions, such as Yahoo messenger and Bloomberg.

The daily $5tn (£3.1tn, €3.7tn) currency market is the largest in the financial system and is pegged to the value of funds, derivatives and financial products.

Morningstar estimates that $3.6tn in funds, including pension and savings accounts, track global indexes.

Banks Ban Instant Messenger Chat Rooms

A number of banks around the world have revealed that they launched internal reviews into their FX trading procedures, after America's Department of Justice and the Federal Bureau of Investigation launched a criminal investigation into whether the world's biggest banks attempted to manipulate the currency markets.

Switzerland's Financial Market Supervisory Authority (Finma) is also looking into whether FX market rigging has occurred.

At the beginning of November, Lloyds Banking Group confirmed that it is reviewing its currency trading processes.

On 30 October, the Royal Bank of Scotland (RBS) revealed that it is assessing its currency trading processes in a bid to calm client fears over a potential marketing rigging investigations.

RBS said in a statement that "we are currently considering processes around the benchmark service."

On 23 October, an RBS sales team sent an email to clients to say that it is reviewing how it trades in the minutes before key FX benchmarks are set.

A day before RBS' announcement, Deutsche Bank revealed that its balance sheet was hit by billions of euros of litigation costs which subsequently led the German lender to report a near 100% drop in profits.

Deutsche Bank has allegedly spent millions of dollars going through traders' emails and chat sessions looking for specific dates, phrases and keywords in a bid to root out evidence of wrongdoing.

RBS and JPMorgan are the latest financial groups to ban multi-bank and multi-dealer chat rooms. Deutsche Bank, Barclays and Citigroup have allegedly followed suit.