SEC Investigates Whether Currency Traders Distorted ETF and Options Prices, Manipulated Currency Markets

InvestmentNews is reporting that according to sources in the know, the Securities and Exchange Commission is trying to figure out whether currency traders at the biggest banks fixed benchmark foreign-exchange rates and distorted the process for exchange-traded funds and options. The regulator, which oversees the options and ETFs involved with the rates, joins the ongoing US and European regulatory investigations into possible currency market manipulation. Also probing the matter is the Commodity Futures Trading Commission, the Federal Reserve, the US Justice Department, New York’s lead banking regulator, and the Office of the Comptroller of the Currency.

European and US authorities have talked to at least 12 banks as they look into allegations reported by Bloomberg News last year accusing dealers of saying they shared data about client orders to manipulate currency benchmark spot rates. Options and other derivatives comprise over 50% of the $5.3 trillion/day foreign exchange market, with the remaining consisting of spot transactions.

In London today, with the Bank of England’s governor, Mark J. Carney talked to lawmakers about concerns that banking officials might have known about and tolerated currency market manipulation. Independent directors are currently conducting a review. Carney testified in front of the Treasury Select Committee.

The bank now has tighter policies obligating employees to internally escalate any reports of improper conduct and speak about they knew of past wrongdoing. Carney said that the bank would establish a new deputy governor position accountable for banking and markets.

In the ongoing international probe into currency market manipulation allegations, 20 traders have already either been let go or placed on leave following internal probes at a number of large banks involved in foreign exchange trading, including JPMorgan Case (JPM), Barclays (BCS), and UBS (UBS). Deutsche Bank (DB) and Citigroup (C) have even terminated the employment of certain staffers. Authorities, however, haven’t accused any of the traders or their banks of doing anything wrong.

Our securities lawyers represent investors that have sustained losses because of exchange-traded fund fraud. Contact The SSEK Partners Group today.

Recap: Mark Carney Faces Lawmakers Over FX, The Wall Street Journal, March 11, 2014

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Stifel, Nicolaus & Century Securities Must Pay More than $1M Over Inverse and Leveraged ETF Sales, Stockbroker Fraud Blog, January 14, 2014

FINRA Orders J.P. Turner to Pay $707,559 in Exchange-Traded Fund Restitution to 84 Clients, Stockbroker Fraud Blog, December 10, 2013