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Traders Rigging Exchange Markets for Profit

Jun
12
Author: Cory Ferraez

Profits are good, but how you get there in the financial world is often the focus for regulators.  Five former traders at the world’s largest financial institutions confirmed that traders are 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.

Traders are “banging the close” by pushing rates higher or lower and profiting from the difference between the reference rate and the price of the their own products.  Even so, experts say that because of the size of the foreign exchange market (4.7 trillion daily), traders would have a hard time manipulating currency rates.   And some fund managers prefer the WM/Reuters rates even if it is rigged because it’s more convenient and cheaper than quotes from individual banks.

Don’t jump the gun, this doesn’t scream “more regulation,” but merely an opportunity for increased awareness and compliance.   This news comes after after three lenders were fined about $2.5 billion for rigging the London interbank offered rate, or Libor, last year.

Thanks to Bloomberg for the article

Lawyers may have been investing their discretionary income into gold hoping to continue to ride the bearish dollar and bullish gold trend.  And those that invested early took advantage of the all time high of $1,900 and some change in August of 2011.  Analyst cite numerous reasons for the decrease, including Central-bank sales to shore up fiscal shortfalls.  So less quantitative easing (QE) means a potential breakdown of the gold/QE relationship investors are “used” to.

Lesson?  Be weary of government intervention through QE over a long period of time. Not to mention the side effects of irregular market prices and the yield curve–like an alcoholic being weaned of the bottle, there are sure to negative consequences.

Thanks to MarketWatch for the article:  Gold sinks more than $100 to 2-year low.