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Forex Manipulation Target of Probe

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Forex Manipulation Target of Probe
cop-arrest

The New York Attorney General's Criminal Enforcement and Financial Crimes Bureau has opened an investigation into forex manipulation by four interdealer brokers who operate currency trading platforms. Subpoenas were served last week to Tullet Prebon PLC, BGC Partners, Inc, GFI Group, and TFS-ICAP Ltd.

TFS-ICAP is a joint venture between ICAP Plc and Cie. Financiere Tradition SA. GFI Group is owned by BGC Partners. This isn't the first brush with the law for ICAP, which was fined $88 million for helping "too big to fail" banks manipulate the LIBOR rate.

The firms are accused of allowing "spoofing" on their trading platforms by big banks, in order to rake in more transaction fees. Spoofing involves placing a large number of orders you never intend to complete, in order to manipulate the price in a desired direction. These orders are all canceled at once before making your "real" trade on the other side, at a price distorted in your favor.

HFT-program

The alleged forex manipulation occurred in futures contracts for emerging market currencies. Due to the low liquidity of these markets, it takes far less effort to move prices where ever un unscrupulous trader wishes.  Spoofing is the same technique used by HFT (high frequency trading) algorithms to manipulate stocks and commodities, including gold.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for SurvivalBlog.com.

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