Swiss regulator flags attempt to manipulate bullion benchmarks

Wed Nov 12, 2014 1:26pm EST
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By Jan Harvey

LONDON (Reuters) - Switzerland's financial watchdog said on Wednesday it had found a "clear attempt" to manipulate precious metals price benchmarks during a cross-market investigation into trading at UBS bank.

The FINMA regulator revealed its findings just days after the precious metals industry decided to automate the setting of reference prices for gold, ending the twice-daily "fix" by a panel of banks which has been used for almost a century.

Along with other precious metal benchmarks, the gold fix has come under increased regulatory scrutiny since a scandal broke in 2012 over manipulation of the Libor interest rate, followed by revelations of similar behavior on the global currency market.

Regulators fined six major banks on Wednesday a total of $4.3 billion over the foreign exchange manipulation, including a 134 million Swiss franc ($139 million) penalty that FINMA slapped on UBS, Switzerland's biggest bank.

FINMA's director Mark Branson said investigations had shown the problems at UBS went beyond currency trading. "The behavior patterns in precious metals were somewhat similar to the behavior patterns in foreign exchange," he said in a conference call with journalists.

As UBS has precious metals and foreign exchange desks under combined leadership, it was not surprising to find similar behavior, he said. "But we have also seen a clear attempt to manipulate fixes in the precious metal market," added Branson, himself a former UBS banker.

FINMA said in its report that it had seen repeated "front running" - trading on advance information not available to clients - on the now defunct once-daily silver fix.

CME Group and Thomson Reuters were named in July as the operators of a new electronic silver benchmark which replaced the fix.   Continued...

The logo of Swiss bank UBS is pictured in front of the Swiss Federal Palace in Bern January 8, 2010. REUTERS/Michael Buholzer