UPDATE 1-Hong Kong questions banks as FX market probe widens to Asia

Wed Oct 16, 2013 5:13am EDT

By Rachel Armstrong and Jamie McGeever

HONG KONG/LONDON Oct 16 (Reuters) - Hong Kong is looking into allegations of price-rigging in the $5.3 trillion-a-day global foreign exchange market as probes into possible currency rate manipulation widen from Europe and the United States to Asia.

The Hong Kong Monetary Authority said on Wednesday that it had spoken to foreign regulators and was speaking to banks about allegations that traders manipulated fixings, or snapshots of where currencies are trading at a particular time in the 24-hour-a-day global market.

Switzerland, Britain and the United States have already opened investigations.

"The Hong Kong Monetary Authority is aware of the allegations. We have been in communications with the relevant overseas regulators and following up with individual banks," the de facto central bank said in a statement to Reuters.

Switzerland's competition commission WEKO and its financial markets regulator FINMA said earlier this month that they had opened investigations into potential manipulation of foreign exchange markets by banks. They did not name the banks under investigation. (ID:nL6N0HU17R)

Last week, a source familiar with the matter told Reuters the United States was also involved in the probe. (ID:nL1N0I111N) Until now, no Asian authority has confirmed it is also involved in the investigations.

Royal Bank of Scotland (RBS.L) has already handed Britain's financial regulator instant messages sent by a former currency trader to counterparts at other banks, Reuters reported last week. (ID:nL6N0HZ2L6)

According to one banking source at one of the biggest FX banks in the world, "every bank" has handed data and other information over.

"It's a two-way flow of information," said a source at a U.S. bank, also one of the world's major FX institutions.

Media reports this week suggest the investigations centre on senior traders at big banks who were part of electronic chatrooms with names such as "The Cartel" and "The Bandits' Club".

Senior traders at certain banks involved in this process are alleged to have shared information with each other ahead of the fixings, such as the size and nature of their clients' orders, in order to manipulate the fixing rate and make money.

Britain's Financial Conduct Authority has declined to comment, as did Royal Bank of Scotland (RBS.L) and JP Morgan (JPM.N), while Citigroup's (C.N) chief financial officer John Gerspach declined to comment during a conference call with reporters on Tuesday.

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