New Evidence Suggests Bank of England Aware of Market Manipulation

New evidence is surfacing that points to the Bank of England (BoE) potentially approving of large banks sharing details of client trade positions.

The charges, first revealed in a Reuters report, are at the center of the global market manipulation probe.

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Bank of England meeting described in chat room text

At issue is a 2012 meeting between currency dealers and the UK’s central bank. In a later conversation that took place in a foreign exchange chatroom, a senior currency dealer who attended the Bank of England meeting said that central bankers had agreed there are “advantages to sharing client order information to minimize market volatility around daily reference rates known as ‘fixings,’” two sources familiar with their content were quoted in the Reuters story as saying.

The transcripts from the chat room interaction are now in the possession of the Financial Conduct Authority (FCA), which regulates Britan’s markets and is investigating.

A Bank of England spokeswoman told Reuters the oversight committee is investigating if any BoE official was involved in the sharing of confidential client information or aware of the sharing of such information between FX market participants, according to the report.  The BoE and FCA also declined to comment.

Another issue identified in the report is apparent inconsistencies in statements from the Bank of England. Initially central bank officials said minutes of the meeting were not prepared until more than a year after the meeting in June 2013.  However, an email showing that the minutes were in fact drafted and circulated to members in July 2012 was uncovered as a result of a Reuters FOIA.

Central bank suspends employee

The central bank suspended an unnamed employee on March 5, 2014 pending investigation into compliance with its processes, the report noted.

In previous statements, the central bank said that the record of the April meeting “does not show any discussion of actual or alleged manipulation of FX benchmarks.”  However, the Reuters report, citing sources familiar with the proceedings, said the regular meeting between chief dealers and Bank officials openly addressed the routine sharing of client information between senior dealers at the top foreign exchange banks.

Last week testimony from Bank of England governor Mark Carney and markets chief Paul Fisher indicated manipulations discussions only centered around non-bank players such as hedge funds.  These statements contradict the new evidence presented in the Reuters story.  “It isn’t our job to go out hunting for rigging on markets,” Fisher was quoted as saying.

“It certainly points to a very gloomy picture. This reinforces why we need to have a thorough, proper outside investigation into what was going on,” Mark Garnier, a Conservative lawmaker and member of parliament’s Treasury Select Committee, was quoted as saying.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)