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
DiffuserThe 10 Nastiest Feuds In Alternative Music
CrackedThe 5 Greatest Movie Sex Scenes
Guitar WorldThe 10 Best Traits of an Awesome Band Member
Cracked5 Famous Albums You Can't Buy Anymore
Mental Floss7 Movies That Sent People Running Out of Theaters
Salon11 Artists Who Are Still Great After Four Decades
- John Fogerty Explains Creedence Clearwater Revival's Hall of Fame Meltdown
- Keith Richards on Getting Busted, Zeppelin and Stones’ Future
- 500 Greatest Albums of All Time
- Dave Matthews Talks Bernie Sanders, New Album, His Guitar Hero
- Upcoming Supreme Court Cases That Could Change History
- Watch Barack Obama Give Kanye West Political Advice
- Krist Novoselic Talks Bernie Sanders, Kurt Cobain Dreams
- 20 Best TV Shows of 2015 So Far