By Jamie McGeever
LONDON Jan 16 The Bank of England discussed
with top London currency dealers their process for setting
foreign exchange rates more than a year before a global
investigation into alleged manipulation, according to a document
provided to Reuters by the bank.
The document, supplied in response to a freedom of
information request for details of a meeting on April 23, 2012
of the chief dealers subgroup of the London Foreign Exchange
Joint Standing Committee, said there was a brief discussion of
"processes around fixes" - referring to the daily setting of
benchmark exchange rates - and "extra levels of compliance".
Two sources with knowledge of the meeting said the traders
told the BoE about online chatroom use in the run-up to the
daily rate-setting. It was not clear how much detail of this the
traders provided at the meeting.
The subgroup, set up for banks and brokers to discuss broad
currency market issues, met at the London offices of French bank
The time lag between the start of the global probe and the
BoE's meeting, at which sources told Reuters traders had
disclosed they were exchanging information via chatrooms about
client positions, raises questions about whether the central
bank should have referred this to the regulators.
Britain's market watchdog, the Financial Conduct Authority,
began enquiries in the first quarter of 2013, but did not
formally open an investigation until October when the U.S.
Department of Justice also launched an investigations into the
largely unregulated $5.3 trillion-a-day market in October 2013.
A source close to the UK probe said the FCA only became
aware of issues raised at the BoE's April 2012 meeting several
Asked on Thursday whether it had followed up the discussion,
a spokesperson for the BoE said: "I cannot add to what is stated
in the record of the meeting."
The BoE also declined to give any specific details of what
was discussed. The minutes of the meeting say only: "There was a
brief discussion on extra levels of compliance that many bank
trading desks were subject to when managing client risks around
the main set piece benchmark fixings, eg WMR."
The key benchmark, known as the WM/Reuters or "London fix",
relates to several exchange rates including the euro, sterling,
Swiss franc and yen. They are compiled using data from Thomson
Reuters and other providers, and are calculated by WM, a unit of
State Street Corp.
Thomson Reuters is the parent company of Reuters
News, which is not involved in the fixing process.
The WM/Reuters rate set at 4 p.m. London time is considered
the benchmark by many because of the large amount of foreign
exchange trading which is done in London.
In response to a previous enquiry from Reuters, the BoE said
the record of the April 2012 meeting did not show "any
discussion of actual or alleged manipulation of FX benchmarks".
THE LONDON FIX
Benchmark foreign exchange rates, often referred to as
fixes, are used to price investments and deals and relied upon
by companies, investors and central banks around the world.
Groups of senior currency traders are alleged to have shared
on Bloomberg chatrooms with names like "The Cartel" and "The
Bandits' Club" market-sensitive information surrounding the
popular currency rate benchmarks known as "the London fix".
This has prompted a global investigation into allegations of
market manipulation and resulted in the firing or suspension of
several traders at major banks.
Britain's Treasury Select Committee could also decide to
look into the role of the BoE, depending on the outcome of the
investigation, a spokesperson for the parliamentary committee
Sources with knowledge of the BoE meeting say traders
flagged the use of chatrooms because banks were reviewing their
policies as a result of allegations that dealers had manipulated
the global interest rates known as Libor. That scandal has so
far cost banks $6 billion in settlements and seen the first
suspects brought to court.
One of the dealers in attendance was Rohan Ramchandani, the
head of European spot currency trading at Citigroup. He
was fired by the bank last week, according to sources with
knowledge of the matter. Citi declined to comment.
The BoE said James Pearson from Royal Bank of Scotland
, Niall O'Riordan from UBS and BoE
representatives Martin Mallet and James O'Connor were also
present at the meeting. O'Riordan from UBS has since been
suspended, according to a source with knowledge of the matter.
Citigroup, RBS and UBS declined to comment. None of the
traders were available for comment, and a spokesperson for the
BoE said its staff were unauthorised to talk to the press.
The investigations into alleged currency market rigging
intensified this week as U.S. regulators descended on
Citigroup's London offices and Deutsche Bank
suspended "multiple" traders in New York.