Currency Probe Widens as Banks Suspend Traders
An escalating probe into possible rigging of foreign-exchange markets has prompted some of the world's biggest banks
to suspend a number of high-profile currency traders in New York, London and Tokyo in the latest market-manipulation
investigation to rock the banking industry.
More than a dozen traders at five banks are now either suspended or on leaves of absence in connection with global
currency-rigging investigations, according to people familiar with the probes. The investigations, which are focusing in
part on electronic chat rooms with names such as "The Cartel," have uncovered messages in which traders appeared to
inappropriately share market-sensitive information with competitors and joked about their ability to influence exchange
rates, according to people familiar with chat-room transcripts that have been handed over to regulators.
In a sign of the escalating nature of the investigation, at least two banks-- Barclays PLC and UBS AG--have hired
criminal-defense lawyers to represent some of their employees who have been put on leave, according to people familiar
with the investigations. The suspended traders either declined to comment, didn't respond to requests for comment or
couldn't be reached.
The swath of departures leaves big gaps on banks' currency-trading desks and people in the industry said it could
cause disruption to the vast foreign-exchange business. In London, the world's biggest foreign-exchange hub, three of
the senior traders who are on leave are past or present members of a Bank of England committee that oversees the
The foreign-exchange probe is the latest in a growing list of investigations into how lightly regulated financial
markets are susceptible to potential manipulation by bands of traders and brokers.
A five-year investigation into manipulation of the London interbank offered rate, or Libor, and other benchmark
interest rates has so far yielded settlements with five financial institutions, which have admitted wrongdoing and paid
a total of more than $3.5 billion in penalties. European authorities have also said they are investigating possible
rigging of oil-market benchmarks.
The swift pace of the currency probe, in which senior figures in the foreign-exchange market have already been
sidelined, is one major difference between that and the Libor investigation.
The currency investigation started in April when the U.K.'sFinancial Conduct Authority began looking into activity in
London, which accounts for 41% of global foreign-exchange activity, according to the Bank for International Settlements.
Recently, the probe has gathered pace, with authorities from the U.S., Switzerland and Hong Kong launching
investigations. Eight banks have handed over materials to British authorities, according to a person familiar with the
The electronic chat rooms that are a focus of the probe take place through widely used Bloomberg terminals and are
populated by top currencies traders at financial institutions, according to people briefed on the investigation.
Investigators and bank officials have been scouring chat transcripts for alleged evidence of the traders improperly
working together to influence exchange rates, these people said. One chat room--dubbed "The Cartel" and "The Bandits'
Club," among other names--has attracted particular regulatory scrutiny, although several different chat rooms involving
different traders and different currencies are also under investigation, these people said. Membership of these chat
rooms has shifted as bankers and traders have moved from one employer to another.
A central issue in the probe is the currency "fixes"--the daily snapshots of trading that are used by money managers
and others for valuing portfolios and other purposes. The fix is assessed from market activity in a brief window. The
most popular is at 4 p.m.London time. The close ties between traders at different banks--and the possibility they
colluded in an effort to manipulate the fix--is a key focus of the FCA investigation, according to people familiar with
On Friday, Barclays put six traders on leave after the U.K. bank handed over a trove of what it regarded as troubling
chat transcripts and other evidence to the FCA, according to people familiar with the Barclays investigation. Those
traders include Chris Ashton and Mark Clark in London and Jack Murray in Tokyo, as well as multiple traders in New York,
these people said.
Royal Bank of Scotland Group PLC suspended two London currencies traders, Julian Munson and Paul Nash, according to
people familiar with the matter.
Some traders not involved in the chat rooms also have been suspended. UBS recently put on leave Niall O'Riordan, a
senior currencies trader in Zurich, a person familiar with the matter said. Mr. O'Riordan managed a trading desk that
used to employ a trader who participated in "The Cartel" chat sessions, according to people familiar with the situation.
That trader, Matt Gardiner, in September joined Standard Chartered PLC, which recently placed him on leave, a person
familiar with the matter said.
Citigroup's head of European "spot" foreign-exchange trading, Rohan Ramchandani, has been placed on a leave of
absence, as has Richard Usher, J.P. Morgan Chase & Co.'s head of spot trading for Group of 10 currencies in the European
region, according to people familiar with the matter.
Messrs. O'Riordan, Ramchandani and Usher were all members of the Bank of England's London Foreign Exchange Joint
Standing Committee chief dealers' subgroup at least as recently as December, according to minutes of the group's
meetings. The committee of a dozen senior traders from different banks meets every three or four months to discuss
issues such as foreign-currency regulation and high-frequency trading. In 2011, the group warned that banks "should
prohibit the deliberate exploitation of electronic dealing systems to generate artificial price behavior."
Some people familiar with the global currency market said the suspensions across top-flight market-making banks could
start to hamper the way the business functions, particularly on busy trading days. "It's a few big guys away from being
a serious consideration," said one former trader at a large firm.
Even large currency-trading banks have only a handful of human traders for major currencies in London, as trade
execution has become increasingly electronic in recent years.
Banter and information-sharing among traders is neither new nor unusual. But regulators are hunting for evidence that
this may at times have crossed the line into collusion to jack up markets to the benefit of traders, according to people
familiar with the matter.
"If there's collusion, that's wrong," said a senior banker. "If traders are buying specifically to move the market
away from clients, that's wrong."
Clare Connaghan and Chiara Albanese contributed to this article.
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