Price Benchmarks Said to Be Rigged in the Foreign Exchange Market

Traders at some of the world’s biggest banks have manipulated the WM/Reuters foreign exchange rates used as benchmarks to set the value of trillions of dollars of investments, according to five people with knowledge of the practice. Bank employees have been trading ahead of client orders—a practice known as front-running—and rigging the rates by pushing through trades before and during the 60-second window when the benchmarks are set, say the five, current and former traders who asked not to be identified for fear of reprisals. Dealers colluded with counterparts at different firms to boost chances of moving the rates, say two of the people.

The manipulation occurred daily in the spot foreign exchange market and has been going on for at least a decade, affecting the value of funds and derivatives. The $4.7 trillion-a-day currency market, the biggest in the financial system, is also one of the least regulated. “The FX market is like the Wild West,” says James McGeehan, co-founder of FX Transparency, a firm that advises companies on foreign exchange trading. “It’s buyer beware.”