US investigates currency trades at major banks

NEW YORK: US federal authorities are investigating activities of traders at major global banks suspected of forming cartels and altering the price of foreign currencies, a manipulation dubbed as "just the tip of the iceberg," according to a media report.

The report said that from their desks at some of the world's biggest banks, traders hatched alliances for their own profits.

"The traders exchanged a series of instant messages that earned them the nickname 'the cartel'...If those suspicions are correct, the group of traders shared a mission to alter the price of foreign currencies, the largest and yet least regulated market in the financial world," The New York Times said.

"And ultimately, they flooded the market with trades that potentially raised the cost of currency for clients but aided the banks' own investments," it said.

US Attorney General Eric Holder has dubbed the manipulation into the foreign currency as "just the tip of the iceberg."

"We've recognised that this is potentially an extremely consequential investigation," the New York Times report quoted him as saying.

Holder said the Justice Department's criminal and antitrust divisions are "taking a leading role" in the "truly global investigation" given that authorities in Britain, EU, Switzerland and Hong Kong are also scrutinising the trading activity.

The Commodity Futures Trading Commission has also opened its own investigation.

Activities of traders at Barclays, the Royal Bank of Scotland and Citigroup are at the centre of an international investigation, with authorities signalling the likelihood of a legal crackdown.

While no individual or institution has been accused of wrongdoing, the latest scrutiny has unnerved the world's biggest banks as it has come fast on the heels of similar investigations into the rigging of global interest rates.

Nine of the largest banks in currency trading have announced they are facing inquiries, placing about a dozen traders on leave pending the outcome of the inquiry.

Banks like Deutsche, Citigroup, Barclays and UBS account for about half of all trading in currency and dominate the market.

According to the NYT report, one former member of the group called the 'cartel' has told colleagues that the nickname reflected only the traders' success and not any improper activity.