These are external links and will open in a new window. But it is still possible for traders to change the value of a currency in order to make a profit. Institutions find it useful to take a snapshot of how much is being bought and sold. Until February, this happened every day in the 30 seconds before and after Since these violations came to light, the window has been changed to five minutes to make it harder to manipulate. Traders can affect market prices by submitting a rush of orders during the window when the fix is set.
This might be where traders obtain confidential information about something that is about to happen and could change prices. For example, some traders shared internal information about their clients' orders and trading positions. The traders could then place their own orders or sales in order to profit from the subsequent movement in prices.
This can relate to the 4pm fix, with a trader placing a trade before 4pm because he knows something will happen at around 4pm. By agreeing to place orders at a certain time or sharing confidential information, it is possible to move prices more sharply. Collusion can be "active", with traders speaking to each other on the phone or on internet chatrooms. It can also be "implicit", where traders don't need to speak to each other but are still aware of what other people in the market are planning to do.
Last November, the UK's financial watchdog, the Financial Conduct Authority FCA gave some examples of how traders at banks calling themselves names such as "the players", "the 3 musketeers", "1 team, 1 dream" and "the A-team" attempted to manipulate foreign exchange markets. In one example, it said traders at HSBC had colluded with traders from at least three other firms to attempt to drive the fix for the sterling-dollar rate lower.
It said traders had shared confidential information about client orders prior to the fix, and then used this information to attempt to manipulate the fix downwards. Afterwards, traders congratulated themselves, saying: I don my hat" and "Hooray nice teamwork".
Traders at these firms then transferred their buy orders to Citi, giving it more influence on the market. After the trade was completed, traders shared congratulatory messages such as "lovely", "yeah worked ok" and "cn't teach that". The price movements arising from the manipulation are so small that holidaymakers are unlikely to notice a big difference when buying foreign currency.
The biggest losers are companies found guilty of manipulation. The regulators say that some of the banks' clients could have suffered from the market being skewed. That could affect the value of pension funds and investments. This kind of manipulation also further undermines trust in the financial system, which has been through a series of scandals.
Turkey's leader says it could sever ties with Israel if the US recognises Jerusalem as its capital. The foreign exchange market is not easy to manipulate. As it is a hour market, it is not easy to see how much the market is worth on a given day.
Top Stories Turkey warns of 'red line' on Jerusalem Turkey's leader says it could sever ties with Israel if the US recognises Jerusalem as its capital. Why you can trust BBC News. UK Home England N. Ireland Scotland Wales Politics.More...