Sometime back there were reports that many well-known banks had manipulated the London Interbank Rate (LIBOR ) to reap windfall profits. Several banks were fined heavily for indulging in the market abuse. It has now come out that many of them had also manipulated foreign exchange rates.
The foreign exchange market is worth over $5 trillion each year. Over 80 percent of the forex market is managed by just ten institutions. Four of them – UBS, Barclays, Citi and Deutsche have a market share of over 50 percent. The rates are always changing, so those who trade in forex use benchmarks to value their portfolios. One of the most popular benchmarks is the London Fix (4 PM). Many banks reportedly manipulated the benchmark rate by sharing information between themselves.
The people who suffered the most are the institutional clients of the banks, particularly pension funds and institutional investors. A number of pension funds in the US have already filed antitrust suits against some of the banks including Citibank, JP Morgan Chase, UBS, Barclays, Deutsche Bank and others.
Financial services regulators such as the Financial Conduct Authority (FCA) and Bank of England in Britain, FINMA (Swiss regulator), the Security and Exchange Commission (SEC), the Federal Reserve and the Commodities and Future Trading Commission (CFTA ) in the US have launched investigations into forex manipulations. The European Commission and WEKO (Swiss regulator) have also initiated investigations.