FX traders to be interviewed as part of BoE probe -sources

LONDON, July 8 Tue Jul 8, 2014 4:54am EDT

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LONDON, July 8 (Reuters) - An independent inquiry into what the Bank of England knew of alleged currency market collusion will this month quiz senior traders about what guidance they received from the central bank as far back as 2012, sources told Reuters.

Anthony Grabiner, a barrister appointed by the Bank's Oversight Committee in March, has set up a series of interviews with the currency dealers who attended a critical meeting with BoE officials two years ago - one year before a worldwide investigation into alleged collusion and manipulation was launched, sources familiar with the proceedings said.

Accounts of the April 2012 meeting of chief dealers - a subgroup of the BoE's Foreign Exchange Joint Standing Committee - are key to traders' claims that central bank officials turned a blind eye to, or even condoned, activity that regulators are now poring over.

The interviews take Grabiner's review outside the walls of the central bank and into what it knew of now suspect market behaviour and whether it effectively gave a green light for these trading practices to continue.

While the Bank of England has no direct regulatory role over the currency market - the Financial Conduct Authority has that role - it acts as an informal monitor for financial stability purposes.

The crux of the worldwide probe is whether a small group of top dealers shared client order information via electronic chatrooms to corner the market and give them better control of pricing. The extent of this activity and degree to which it amounted to collusion or manipulation has yet to be established by the year-old investigation.

"4 O'CLOCK FIX"

Grabiner, who will be assisted by law firm Travers Smith, will conduct the interviews through July and beyond, the sources said. Grabiner, the BoE and the FCA all declined to comment.

Part of Grabiner's remit is to find out whether BoE staff were "involved in the sharing of confidential client information or aware of the sharing of such information between (market) participants".

BoE minutes of the April 2012 meeting show a "brief discussion" on the process surrounding the setting of daily benchmark exchange rates, known as "the 4 o'clock fix" and now a key focus of the global probe into the $5 trillion-a-day market.

Transcripts of a dealers' chatroom, now in the hands of the FCA, show that one dealer at the meeting told fellow traders subsequently that BoE officials had agreed there were advantages to sharing client order information to minimise market volatility around the daily "fix".

Another trader lodged notes of the meeting with the FCA.

The BoE has said its record "does not show any discussion of actual or alleged manipulation of FX benchmarks". The Bank suspended an employee in March this year, citing concern about compliance with its "internal processes".

The minutes of all but two of the 29 chief dealers meetings from 2005 through 2013 published by the BoE list the attendees. One of the two was April 2012. One trader at the April 2012 meeting has since been fired and one has been suspended. (Reporting by Jamie McGeever; Editing by Mike Dolan and Gareth Jones)

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