Financial Conduct Authority (FCA) chief Martin Wheatley said misconduct allegations surrounding forex trading could be as bad as Libor.

Forex Markets

The FCA chief said it was investigating a range of benchmark rates operating in London.

FCA’s probe

As reported earlier, FCA was considering opening a probe into the potential manipulation of forex rates. The currency market with $4.7-trillion-a-day is the biggest in the financial system, though it is one of the least regulated.

Apart from UK’s FCA, European Union’s antitrust regulators too are examining the possible manipulation of currency rates by the financial industry. Switzerland’s Financial Market Supervisory Authority, Finma and the country’s competition commission also were probing similar potential wrongdoing. Moreover, the U.S. Commodity Futures Trading Commission has also been reviewing potential violations of the law with regards to currency markets.

Forex probe unlikely to conclude this year

FCA’s chief executive Martin Wheatley told UK law makers Tuesday: “We are still in the investigation phase…The allegations are every bit as bad as they have been with Libor”.

Elaborating further, Wheatley added: “I would be surprised if we got to conclusions within this year. I hope that we will next year”.

He said the foreign exchange market was different than Libor in that the forex rates were based on actual trades conducted in very liquid markets, while Libor is compiled by banks submitting their own quotes. Benchmark foreign exchange rates are used to set the value of trillions of dollars of investments and regulators are looking at whether traders at some of the world’s biggest banks colluded to manipulate the rates.

Wheatley said FCA is investigating a number of benchmarks that operate in London. FCA is focusing on the WM/Reuters rates, which are published hourly for 160 currencies and half-hourly for the 21-most traded.

Introduced in 1994, the WM/Reuters rates are extensively used by fund managers to compute the day-to-day value of their holdings and by index providers to track stocks and bonds in multiple currencies. The forex rates are also used in forwards and other contracts. The data for the WM/Reuters is collected and distributed by World Markets Co., a unit of Boston-based State Street Corporation (NYSE:STT) and Thomson Reuters Corporation (NYSE:TRI) (TSE:TRI).