EVERY Market Is Rigged

Bloomberg reports today:

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.

The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said.

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The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges.

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While the rates aren’t followed by most investors, even small movements can affect the value of what Morningstar Inc. (MORN) estimates is $3.6 trillion in funds including pension and savings accounts that track global indexes.

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As market-makers, banks execute orders to buy and sell for clients as well as trade on their own accounts.

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By concentrating orders in the moments before and during the 60-second window, traders can push the rate up or down, a process known as “banging the close,” four dealers said.

Three said that when they received a large order they would adjust their own positions knowing that their client’s trade could move the market. If they didn’t do so, they said, they risked losing money for their banks.

One trader with more than a decade of experience said that if he received an order at 3:30 p.m. to sell 1 billion euros ($1.3 billion) in exchange for Swiss francs at the 4 p.m. fix, he would have two objectives: to sell his own euros at the highest price and also to move the rate lower so that at 4 p.m. he could buy the currency from his client at a lower price.

He would profit from the difference between the reference rate and the higher price at which he sold his own euros, he said. A move in the benchmark of 2 basis points, or 0.02 percent, would be worth 200,000 francs ($216,000), he said.

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To maximize profit, dealers would buy or sell client orders in installments during the 60-second window to exert the most pressure possible on the published rate, three traders said. Because the benchmark is based on the median of transactions during the period, placing a number of smaller trades could have a greater impact than one big deal, one dealer said.

Traders would share details of orders with brokers and counterparts at banks through instant messages to align their strategies, two of them said. They also would seek to glean information about impending trades to improve their chances of getting the desired move in the benchmark, they said.

Interest Rates Are Manipulated

Unless you live under a rock, you know about the Libor scandal.

For those just now emerging from a coma, here’s a recap:

Derivatives Are Manipulated

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed: through gamed self-reporting.

Commodities Are Manipulated

The big and and government agencies have been conspiring to manipulate commodities prices for decades.

Gold and Silver Are Manipulated

The Guardian and Telegraph report that gold and silver prices are “fixed” in the same way as interest rates and derivatives – in daily conference calls by the powers-that-be.

Oil Prices Are Manipulated

Oil prices are manipulated as well.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currencies and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Participating in various Ponzi schemes. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

Category: Currency, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “Currency Markets Are Rigged”

  1. Frilton Miedman says:

    The CFMA allows any derivative or future to be purchased in limitless quantity with absolutely no public disclosure, this entire blog topic completely true.

    Bernie Sanders put a spotlight on it in 2010 by leaking CFTC records of oil futures from the Summer of 2008 that showed Morgan Stanley and Goldman Sachs were responsible for oil @ $145 despite lower demand & higher supply, which in turn constricted over-extended consumers and initiated the onslaught sub-prime defaults so they could benefit from short CDO counter positions (“Shitty deals”)

    The CFMA makes this possible for TBTF’s with any metal, material, commodity, grain or energy valuation – making them omnipotent over input costs for any sector.

    Dodd-Frank was set to require position limits, but not anymore, the banking lobby is shredding it.

    • Whats weird about the whole thing is that Egan Jones doesn’t charge investor-clients for sovereign ratings — no revenue, no profits, no change in business — because of the SEC’s ban.

      • Willy2 says:

        1. Isn’t their core business to rate companies ? And rating countries is then simply a teaser to attract customers. To attract attention ?
        2. The simple fact, the Treasury (Geithner & co.) + SEC retaliated against Egan Jones speaks volumes. Seems the Treasury “doesn’t like” bad publicity.
        3. Remember the case of Eliot Spitzer ? The District Attorneys of the states wanted to take action against the fraudulous mortgages lending practices. But they were blocked by the Treasury (OCC). When Spitzer complained in an article in the Washington Post
        http://articles.washingtonpost.com/2008-02-14/opinions/36828502_1_national-banks-occ-consumer-protection

        the gov’t unleashed the “attack poodles” to attack Spitzer.
        http://rense.com/general81/why.htm

        Do you see a pattern emerging ?

  2. 873450 says:

    What are you going to do about it?
    — TBTF (quoting Boss Tweed)

    Is there a way to ensure these mistakes can’t happen?
    No?
    Well, I’m on record saying I don’t like this, it’s not fair and I hope things get better someday.
    — POTUS Obama

  3. rallip3 says:

    Yes, but if the bulls are manipulating prices higher while the bears are manipulating them lower, maybe the resulting price is more decent than you might imagine from the inputs! Think invisible hands…

  4. PeterR says:

    Every Market is Rigged?

    “I been a’tryin’ to tell ya . . . ”

    HAL
    2001 — A Space Odyssey

    — Phoenix Rising —

    HAL
    2013 — A Space Odyssey

    _______________________________________________________________

    “I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do.”

    _______________________________________________________________

  5. capitalistic says:

    Why is any of this news?

  6. Lugnut says:

    It’s ‘news’ only in as much as it’s published in a public nwespaper with specifics. I think more of these crimes are getting made public because the people involved slowly realize that very little if anything will be done by enforcement agencies to prosecute them on a direct basis, so its less risky to leak info.

    The realization is that we exist in a financial kleptocracy where the middle class muppets only serve to be a giant sponge to wring dry by the banks. It is made all the more shocking by how we, as a slow boiled frog society, continue to react with nothing but apathy at a conga line of malfeance, fraud, and F-Us by the bankers. This is followed on by a silent non-responsive F-U by our governement which refuses and abeits these crimes and protects their interest over ours.

    I drive by a shiny HSBC branch on the way to work. I have often fantasized about spry painting ‘drug pimps’ in red spray paint on the side and chucking a molotov through the window. Of course the same government that criminally prosecuted exactly no one at this foreign bank for their habitual money laundering of drug money in the US, would certainly without a doubt prosectute me to fullest extent of the law possible and throw me in jail for that act of criminal protest.

    Cui Bono

  7. ElSid says:

    No. No. No.

    Selling 400 tons of gold within a timespan of a few minutes makes perfect sense.

  8. dss says:

    Rick: How can you close me up? On what grounds?
    Renault: I’m shocked, shocked to find that gambling is going on in here.
    Employee of Rick’s: [hands Renault money] Your winnings, sir.
    Renault: Oh, thank you, very much. Everybody out at once!

    And these inconvenient truths will be duly noted, but nothing changes as the foxes guard the hen house.

    Too much money is made for all those involved for anyone to stop the game. Revolving doors between the banks and governments ensure that those involved will never be prosecuted. Not much the peons can do to stop any of it.