LONDON (Reuters) — Global
investigations into alleged currency market manipulation intensified
on Wednesday as U.S. regulators descended on Citigroup's London
offices and Deutsche Bank suspended several traders in New York,
sources told Reuters.
The presence of Federal Reserve and Office of the Comptroller of the
Currency officials at Citi's Canary Wharf office in the east of
London this week comes after Citi last week fired its head of
European spot foreign exchange trading, Rohan Ramchandani, following
a prolonged period on leave, one source familiar with the matter
The suspensions of staff at Deutsche Bank in New York and possibly
elsewhere in the Americas followed investigations into
"communications across number of currencies," a second source said.
These are the latest developments in the worldwide investigation
into allegations that traders at some of the world's biggest banks
colluded to manipulate the largely unregulated $5.3 trillion-a-day
foreign exchange market, by far the world's biggest.
Deutsche and Citi are the two biggest players in that market,
accounting for a combined 30 percent of that turnover, according to
a Euromoney magazine poll. Deutsche has been the biggest FX bank for
nine years running.
The Fed and OCC officials visiting Citi in London are at the
"preliminary stage" of information-gathering and their presence is
"independent" of Ramchandani's sacking, the first source added.
The OCC is an independent regulatory and supervisory bureau of the
U.S. Treasury supervising nationally chartered banks, while the Fed
oversees the holding company. Both declined to comment on the
An OCC spokesman said the OCC has an office in London to support its
large bank supervision team there, so it would not be surprising
that they have people visiting London branches of U.S. banks.
In addition to having the London office, the OCC will often augment
a team at any one office with teams from elsewhere with particular
expertise, he added.
Citigroup, Deutsche Bank and Britain's financial watchdog, the
Financial Conduct Authority (FCA), declined to comment.
A third source familiar with the investigation said the British
regulator was aware of the operation at Citi.
"HUNDREDS" COULD BE IMPLICATED
In October last year, the FCA began a formal investigation and the
U.S. Justice Department confirmed it was actively investigating
possible manipulation of the global FX market.
The FCA is focusing on around 15 banks, whom it has asked for — or
required to provide — information about currency trading activities.
Although several traders at several banks have been suspended or put
on leave, Ramchandani is the highest profile departure to date.
Ramchandani could not be reached for comment.
The investigations centre on senior traders' communications in
electronic chatrooms, which also featured prominently in a five-year
probe into the rigging of a key interest rate known as the London
interbank offered rate, or Libor.
The Libor scandal has already cost banks $6.0 billion in settlements
and seen the first suspects brought to court.
In an effort to avoid the further wrath of authorities, global banks
such as Citi, Deutsche, JP Morgan, UBS, and Goldman Sachs have
curtailed the use of chatrooms.
Traders at banks and other financial institutions often communicate
with each other via third-party services including those offered by
Bloomberg LP and Thomson Reuters Corp., the parent of Reuters News.
Groups of senior FX traders on Bloomberg chatrooms, known by names
such as "The Cartel" and "The Bandits' Club", are alleged to have
shared market-sensitive information surrounding the popular
benchmark currency rate known as the London "fix".
This is the WM/Reuters "fix", which is set at 4 pm London time,
using actual trades and order rates from Reuters and rivals such as
EBS during a 1 minute "fix" period. WM, a unit of State Street,
calculates the benchmark using the median of the trades and the
The WM/Reuters FX rates are used by investors and corporations
looking for a rate to price their portfolios and currency holdings.
Most of the main equity and bond index compilers also use the rates
in their calculations.
Another source familiar with the investigation told Reuters in New
York that "hundreds" of traders around the world were potentially
engaging in these practices.
(Reporting by Jamie McGeever; additional
reporting by Aruna Viswanatha in Washington, Emily Flitter in New
York, Kirstin Ridley in London; editing by Mike Dolan, Alex Smith
and Louise Heavens)