Forex Settlement Rates Have Always Been Rigged

By Lawrence

Difficult choiceAccording to the latest report from Bloomberg, the official WM/Reuters rates are rigged for a long time. The article is a good read for any forex traders not aware of the problem. The scam is done in such elaborate manner that it can put those heist movies to shame.

It may be news to many retail traders. But it is a well-known conspiracy theory among the forex communities that these settlement rates are rigged to benefit specific parties from time to time. Once again, another conspiracy theory in the financial market is proven to be the truth.

Maybe we should question the way many of these financial markets are designed. After all, if there exists an incentive to rig the game, people will do it as long as they think that they will not get caught. It is part of human nature. That’s why as a society we have rules and regulations in place so that the society can function properly.

The problem in this case, however, may not even result in prosecution because of the nature of the spot market is not regulated like a regular financial instrument.

I find this disturbing and surreal.

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Comments
  • MidKnight June 12, 2013 at 2:35 am

    I read the bloomy piece this morning and was very surprised. I don’t see a solution for it. The banks will never agree to centralizing Interbank, they know how much money they will lose if it was centralized and regulated. I can’t see a solution to it.

    I had the pleasure of chatting with a senior FX trader for the ANZ bank (ANZ does the majority of aussie and new zealand trade) and he said to me without even hesitating that front running large client orders is a regular event. I got the impression though that it was mainly for scalp type trades. Still, its risk-free money for them — they will not agree to anything that will give that opportunity up.

    With kind regards,
    MK

  • Lawrence Chan June 12, 2013 at 2:40 pm

    It is not just the closing orders that line the pockets of these firms and traders.

    It is also the side-bet options that are based on that specific set of settlement prices as they are deemed “objective” and with 3rd party credential.

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