British report raises questions about ties between currency traders, brokers

Thu Nov 13, 2014 4:01pm EST
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By Jamie McGeever

LONDON (Reuters) - An independent report into the Bank of England's role in the global currency market has raised questions about the relationship between commercial bank dealers and brokers for the first time since regulators began investigating trading practices.

The report of an inquiry led by commercial lawyer Lord Anthony Grabiner shows how an unidentified trader raised a range of concerns with the British central bank three years ago, including over the role of brokers in deals struck at the "London fix".

Investigations by international regulators into the $5.3 trillion-a-day foreign exchange market have focused on the daily fix, the one-minute window at 4:00 pm when global benchmark currency rates are set.

Grabiner's report was published on Wednesday, the same day that British and U.S. authorities fined six of the world's biggest banks a total of $4.3 billion for failing to prevent their traders sharing clients' order information and attempting to manipulate the market.

Included in the 57-page report are transcripts of a telephone conversation in October 2011 when the bank trader expressed his worries to the Bank of England's then chief currency dealer Martin Mallett.

Mallett was fired on Tuesday for undisclosed "serious misconduct" relating to the Bank's "internal policies", the BoE said, although it added that this was unrelated to the global investigation. Mallett did not respond to a Reuters request for comment.

In the call, the trader spoke of his concern that banks were not only executing transactions at the fix for their clients but also a large number of speculative deals on their own behalf through brokers, suggesting that these may not be "genuine".

"I'm sure a lot of them are being made up and washed around," the trader said.   Continued...

Pedestrians walk past the Bank of England in the City of London May 15, 2014.  REUTERS/Luke MacGregor