Regulators imposed total fines of $3.3 billion (£2 billion) on Citibank, HSBC, JPMorgan Chase, The Royal Bank of Scotland and UBS for their conduct on FX markets between January 2008 and October 2013.


The Foreign Exchange ("FX") market is the largest financial market in the world, with a daily average turnover of $5.3 trillion, 40% of which takes place in London. An important part of the FX market derives from the financial activities of investment vehicles seeking to protect themselves from unwanted movements in the FX market by hedging their positions through FX‐based derivatives and repatriate global currency holdings through FX spot trading.

Currency benchmark rates

FX transactions are most frequently based on WM/ Reuters "Closing Spot Rates". These rates are calculated using the median of all currency trades in a minute‐long period starting 30 seconds before 4:00pm London time. Banks often guarantee to clients that transactions on the FX market will be done at the WM/Reuters Closing Spot Rates, which are favoured by clients as a means of valuing global currency holdings and indexes that span multiple currencies.

Manipulation of the FX market

From September 2013 onwards, evidence has come to light suggesting that, since at least 2008, banks have inappropriately shared market-sensitive information with rivals and manipulated WM/Reuters Closing Spot Rates. FX traders, who typically communicate via email, chat rooms, and instant messages, suspiciously referred to themselves as "The Cartel" "The Bandits' Club" and "The Mafia" amongst other names. Since this evidence has come to light, regulators have raided suspected banks in the United States, the United Kingdom, Germany, Switzerland, Hong Kong, Singapore, Australia and New Zealand.

Regulatory fines

On 12 November 2014, the U.S., British and Swiss regulators imposed total fines of $3.3 billion (£2 billion) on Citibank, HSBC, JPMorgan Chase, The Royal Bank of Scotland and UBS for their conduct on FX markets between January 2008 and October 2013. The investigation into Barclays Bank continues. The regulators' investigations focused on G10 spot FX currency rates, which comprise US Dollar, Euro, Japanese Yen, British Pound, Swiss France, Australian Dollar, New Zealand Dollar, Canadian Dollar, Norwegian Krone and Swedish Krona.

Impact on investors

Various firms of economists and other financial experts have carried out preliminary studies of the potential losses corporate users may have suffered from the manipulation of the WM/Reuters Closing Spot Rates. Experts cite several techniques which traders allegedly used to manipulate the WM/Reuters benchmark and, consequently, the prices of FX derivatives and currencies based on those rates. The three most commonly cited techniques are 'front running', 'banging the close' and 'painting the screen'.


"Companies and investors were consistently denied a competitive currency rate because of the banks' collusive practices and traders were able to generate additional profit at their clients' expense using commonly-cited techniques such as 'front running'."
Anthony Maton, Managing Partner at Hausfeld (London)


The manipulation of WM/Reuters Closing Spot Rates significantly impacted users of FX-based derivatives and FX spot trading. Investment vehicles were consistently denied a competitive currency rate because of the banks' collusive practices and traders were able to generate additional profit at their clients' expense using these techniques. Thus, any investment vehicle that engaged in FX transactions directly or indirectly with one or more of the colluding banks between 2008 and 2013 may seek damages.

Next steps

Any damage analysis will need to address whether the entity engaged in FX‐based derivatives and FX spot trading based on the WM/Reuters Closing Spot Rates and will involve an analysis of the individual FX transactions that were conducted.


Experts cite the following techniques which traders allegedly used to manipulate currency rates:

  • Front running: traders agreed that when they received customer orders, they would "front run" on customer information as a group, and then trade their own positions before executing their customers' market‐moving trades;
  • Banging the close: traders broke up large customer orders into small trades and concentrated the trades in the moments before and during the 60‐second fixing window in order to spike the published rates up or down; and
  • Painting the screen: traders placed phony orders with one another to create the illusion of trading activity in a given direction in order to move rates prior to the fixing window. After the WM/Reuters Closing Spots Rates were calculated, the colluding banks reversed those trades.

View the FCA Press Release online http://www.fca.org.uk/news/fca‐fines‐five‐banks‐for‐fx‐failings

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.