* UK's FCA examines chatroom transcripts about key meeting
* Trader comments could challenge Bank of England
* Bank of England and FCA decline comment
By Jamie McGeever
LONDON, March 19 British regulators are
examining evidence relating to a 2012 meeting of currency
dealers and Bank of England officials which potentially
challenges the central bank's assertion it had not condoned
sharing details of client orders.
The practice of sharing details about such orders is at the
centre of a global rigging probe.
Transcripts of a foreign exchange chatroom, now in the hands
of Britain's Financial Conduct Authority, reveal for the first
time that an un-named senior dealer who attended the meeting
told fellow traders the next day that Bank officials had agreed
there were advantages to sharing client order information to
minimise market volatility around daily reference rates known as
"fixings", two sources familiar with their content told Reuters.
By sharing information during these fixings, traders are
able to match trades and minimise price swings, thereby
lessening the risk they take on big transactions.
These and other transcripts are now part of the formal
investigation by the FCA into allegations of collusion and
manipulation of the $5.3 trillion a day global foreign exchange
market. Reuters was unable to view the precise words of the
senior trader because the transcripts are confidential.
The chatroom transcript, dated April 24, 2012, could now
become a central piece of evidence in the probe as it is one of
the few pieces of written material from the time of the April 23
meeting in London to have so far come to light.
At stake is whether the Bank of England, in its role as the
official monitor of London currency markets that command some
40 percent of the global market, was aware of and condoned
activity among market-making banks that is now alleged to have
amounted to collusion and manipulation.
A Bank of England spokeswoman said the Bank's oversight
committee is conducting an investigation into whether any BoE
official was involved in the sharing of confidential client
information or aware of the sharing of such information between
FX market participants, and therefore it would not be
appropriate to comment. The FCA also declined to comment.
The Bank of England's own minutes, which were released in
January following a freedom of information inquiry by Reuters,
were not prepared until more than a year after the meeting in
June 2013. The Bank has given no explanation for this apparent
lapse in record keeping, although it suspended an unnamed
employee on March 5, pending investigation by the Bank into
compliance with its processes.
The Bank said in a previous statement that the record of the
April meeting "does not show any discussion of actual or alleged
manipulation of FX benchmarks".
However, sources familiar with the proceedings of the
meeting have told Reuters that the regular gathering of chief
dealers and Bank officials, which on this occasion was held at
the central London offices of French bank BNP Paribas, openly
addressed the routine sharing of client information between
senior dealers at the top foreign exchange banks.
And one of the senior dealers present at the meeting has
since lodged copies of his own notes with the FCA, they added.
Testimony from BoE governor Mark Carney and the central
bank's markets chief Paul Fisher last week said discussions
between the Bank and top dealers about potential manipulation
around key market fixings in previous years had only delved into
the activity of non-bank players such as hedge funds.
Fisher, who was head of foreign exchange at the central bank
until 2009, said last week that he was unaware of any
allegations of collusion between traders "until we heard this
news that started to come through last year (2013)."
The only reference to any discussion is in the minutes of
the meeting of the chief dealers subgroup of the BoE-sponsored
Foreign Exchange Joint Standing Committee, which were released
in January which simply say: "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
Minutes were not taken of that specific part of the
discussion at the request of chief Bank of England currency
trader Martin Mallett, who chaired the committee, according to
one source familiar with details of the meeting.
Mallett has not responded to Reuters attempts to contact him
and the Bank of England declined comment.
ON THE HUNT
Allegations senior traders in the FX market had shared
client order information with each other first became public in
June last year.
Britain's market regulator began looking into these
allegations at least as far back as early 2013 and formally
announced it was investigating in October, the same month the
U.S. Justice Department opened its own probe.
The foreign exchange market's main industry body, the
ACI, says that banks must be allowed to share details of their
overall position with others, but differentiate between that and
either cartel-like collusion to move the market or the breaking
of confidentiality agreements with particular clients by sharing
details of their orders, both of which go against the ACI code
More than 20 traders at some of the world's biggest banks
have so far been placed on leave, suspended or fired. Carney and
other senior financial figures have said the FX investigation
could be bigger than the Libor rate-rigging scandal, which has
triggered criminal prosecutions and $6 billion in settlements.
Carney said he was first alerted to allegations BoE staff
may have somehow been involved or aware of market rigging on
Oct. 16, which prompted an internal investigation within 48
"We have no information that suggests that anyone at the
Bank of England condoned manipulation, or facilitated,
participated in market manipulation," Carney said.
Industry, market and legal sources contacted by Reuters all
said they could not recall a major central bank suspending an
individual as part of an investigation into allegations of
"It's highly unusual for a central bank to find itself in
this position, and they have some difficult questions to
answer," said Vivienne Tanchel, a barrister and former City of
London trader now specialising in criminal, regulatory and
financial litigation, at 2 Hare Court in London.
At the same Treasury Select Committee hearing, Fisher said
that discussions between BoE officials and traders about
possible manipulation in 2006 and 2008 centred on third-party
forces such as hedge funds moving the market with big trades.
He made a clear distinction between that and collusion,
which is what is under investigation now and which he said he
knew nothing about until last year.
"It isn't our job to go out hunting for rigging on markets,"
(Editing by Alexander Smith and David Evans)