Everything is Rigged, Vol. 9,713: This Time, It's Currencies
New allegations could be even worse than the LIBOR scandal
I'll get into this in more detail later (I'm on deadline for a magazine feature), but this story just landed. Given the LIBOR story, the Interest Rate Swap manipulation story, the Euro gas price manipulation story, the U.S. energy price manipulation story, and (by now) countless others of the "Everything is Rigged" variety, this screams out for immediate notice. Via Bloomberg:
Traders at some of the world's biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice . . .
Employees have been 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, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.
This time the rates allegedly being rigged are in the foreign-exchange or "FX" markets, meaning that if this story is true, it would almost certainly trump LIBOR for scale/horribleness.
As one friend of mine who works on Wall Street put it, "It's endless! This is the biggest market in the world." Bloomberg suggested the story is just the tip of the iceberg:
"The FX market is like the Wild West," said James McGeehan, who spent 12 years at banks before co-founding Framingham, Massachusetts-based FX Transparency LLC, which advises companies on foreign-exchange trading, in 2009. "It's buyer beware."
The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges.
Again, more on this later. But the key thing here is the, uh . . . well, the consistent leitmotif of all these stories. One after another, it's the same thing: Insiders rigging benchmark rates, shaving money from basically everyone on earth, systematically and over periods of many years. It's the ultimate taxation-without-representation story – crazy stuff.
Around the Web
Around the Web
Cracked5 Movies That Made Huge Stars Quit Acting Forever
DiffuserThe 12 Most Shocking Crimes In Rock History
Guitar WorldTop 10 Best (and Worst) Comeback Albums of All Time
SalonThe 7 Most Offensive TV Shows Of All Time
Mental Floss10 People Banned From SNL
CrackedThe 5 Greatest Movie Sex Scenes (Where Nobody Has Sex)
- Breaking Benjamin Battle Mystery Illness on Painful Road to Number One
- 500 Greatest Albums of All Time
- Watch Chief Keef Salute Late Cousin in 'Ain't Missing You' Video
- Kim Kardashian Gets Real: 11 Revelations From the New Cover Story
- A Brief History of the 27 Club
- 500 Greatest Songs of All Time
- Watch Channing Tatum Do Seven Dances in 30 Seconds