Rigged-Benchmark Probes Proliferate From Singapore to UK – Bloomberg 06-18-13

Salient to Investors:

If there is a chance to rig benchmark rates in world markets, someone will try.

Charles Geisst at Manhattan College said time and again all these markets have been influenced by major market-makers – a polite way of saying they have been rigged.

Barclays, UBS, and RBS have been fined $2.5 billion in the past year for distorting the Libor. Traders who stood to profit worked with bank employees responsible for submissions for the benchmark to rig the price, according to the FSA.

Mark Williams at Boston University said many bankers continue to behave as they did prior to the financial crisis, so banks and their regulators have to cap bank risk-taking behavior before meaningful change can occur – a global problem and not isolated to a few big banks.

Distortions are being found in areas of Wall Street that are beyond the scope of initiatives to rein in excesses such as those that led to the 2008 financial crisis. Spot foreign-exchange transactions fall outside the EU’s Mifid and are exempt from Dodd-Frank.

The currency market, the biggest in the financial system, is one of the least regulated because transactions occur away from exchanges.

Jay Ritter at University of Florida said regulators are frequently reactive and do not search for possible violations unless something happens, such as the press calling attention.

Benchmarks such as Sibor and Libor are calculated by asking firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. ISDAfix is created by averaging bank submissions rather that actual trade data.

Read the full article at http://www.bloomberg.com/news/2013-06-16/rigged-benchmark-probes-proliferating-from-singapore-to-london.html

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