General Chat

The Financial Conduct Authority (FCA) has imposed fines totalling £1,114,918,000 on five banks for failing to control business practices in their foreign exchange trading operations, in levying the fines they said, the failings at these banks undermine confidence in the UK financial system and put its integrity at risk, they also said in their finding:-

"Firms can legitimately manage risk associated with client orders by trading in the market and may make a profit or loss as a result. It is completely unacceptable, however, for firms to engage in attempts at manipulation for their own benefit and to the potential detriment of certain clients and other market participants"

In the report under (Notes for Editors - The Final Notices) they give details of what each bank and their traders got up to :-|

Now I don't know about you, but in my book, what took place, if it was not fraudulent then it was deception - or a combination of both, and it was designed to deprive others of funds they would have been rightly entitled to.

The organisations involved have been punished with fines, but what about the individuals who colluded to rig the rates, should they not be arrested, charged, and put before a judge or magistrate in a court of law - or they subject to a different set of laws than you or I ?

http://www.fca.org.uk/news/fca-fines-five-banks-for-fx-failings

The usual method of working out forex ( foreign exchange ) contracts relies on Black-Scholes option pricing and some parameters usually known as "the Greeks". Forex trading may seem somewhat arcane to some and vexing to others ( especially the French & Russian govts ) but there is nothing illegal in it. Without it world trade would gum up in no time at all.

Where the traders went wrong was in "fixing" some of the parameters derived from LIBOR (London Interbank Offer Rate ) thus creating a false market in the currency options.

Creating false financial markets in this way has been criminal in the UK way back into C18 when enough MPs were financially numerate enough to understand large scale scams. The earliest such ramps were the "South Sea bubble" and the Dutch tulip mania. Trading in financial derivatives only really got going in the 1990s.

I have no idea why the traders all the way up to Mr Diamond have not been charged with fraud. There is no need to create a new class of offence. As the USA has been seriously hit by what happened in the UK the US could demand extradition for trial in the US where the culprits would get a long jail term. If this does not happen it will be because (a) the US prefers to extract large fines from UK banks. (b) fear of washing US dirty linen in public.

Nincompoop managers in control of greedy young men was never a good idea.

What is a derivative ? In simple terms a financial derivative is a right to the cash flow of something without owning the underlying financial asset. Taking the 20009 crash as an example the underlying assets were mortgages which create a cash flow of mortgage repayments. The right to the income stream i.e. mortgage repayments was traded independently of the underlying mortgage. The mortgagee would have no idea that his mortgage was being traded as a financial asset.

Ordinary companies and high net worth individuals should never ever get involved in derivative based contracts or loans. Unfortunately quite a few UK SMEs with financial directors of limited brain did just exactly that.

As we build a society where only the rich have a real stake in our way of life & where the creation of wealth is the most prized virtue, we establish an underclass who steadily lose hope of living other than at the margins of society.

And the poor have always lived without hope for generations.

Thanks Rollo very informative, I don't know much about the Dutch Tulip mania except that it was something to do with people speculating on the tulip bulb market.

However, I can vaguely recall being taught at school about the South Sea Bubble, think I am right in saying that it began when a company with the backing of senior Tory politicians, offered to deal with the National debt, this led to other dubious ventures and when the whole caboodle came tumbling down, many of the those involved, including politicians and government officials - were jailed.