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Traders questioned as NY probe of automated FX heats up

Reuters - UK Focus

By Karen Freifeld

NEW YORK, Oct (HKSE: 3366-OL.HK - news) 5 (Reuters) - New York's banking regulator has questioned dozens of traders and executives at Credit Suisse (LSE: 0QP5.L - news) Group AG, Barclays (LSE: BARC.L - news) , Deutsche Bank (Other OTC: DBAGF - news) and other banks about whether their electronic foreign exchange trading platforms were rigged, according to a person familiar with the matter.

The interviews, which have taken place over recent months, provide evidence the latest probe of major banks over foreign exchange rate manipulation is heating up. The questioning has been conducted by lawyers at New York's Department of Financial Services.

A spokesperson for the New York banking regulator declined to comment. Representatives of Credit Suisse, Barclays and Deutsche had no immediate comment.

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Seven banks have already paid over $10 billion to authorities in the U.S (Other OTC: UBGXF - news) . and Europe for failing to stop traders on the spot market from trying to rig foreign exchange rates, with some pleading guilty to criminal charges.

But, while spot trading probes were resolved, investigations of possible currency manipulation through electronic platforms continued.

Barclays' consent order with New York in May resolved its attempts to manipulate spot trading to benefit its positions, for instance, but explicitly did not release claims concerning electronic systems used in FX trading.

New York has been investigating whether Barclays and Deutsche Bank used algorithms on their trading platforms to front-run or otherwise manipulate foreign exchange rates since last year, sources have told Reuters.

New York also sent subpoenas to Credit Suisse, BNP Paribas (Xetra: 887771 - news) , Goldman Sachs Group Inc and Societe Generale (Swiss: 519928.SW - news) , sources have told Reuters. nL4N0VK61V

People familiar with the probe have described a latency period between the time an offer is floated and accepted, and questioned whether banks were gaming clients during that time.

The U.S. Department of Justice has a parallel electronic trading probe.

A Justice Department spokesman declined to comment on the status of that probe.

In May, Citigroup Inc (NYSE: C - news) , JPMorgan Chase & Co (Xetra: 850628 - news) , Barclays and Royal Bank of Scotland Plc pleaded guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the spot trading market.

UBS AG (NYSEArca: FBGX - news) pleaded guilty a different charge in connection with the probe, and Bank of America Corp was fined but avoided a guilty plea in connection with its traders' actions.

Together, the banks were hit with penalties of nearly $6 billion, on top of fines of $4.3 billion levied by Britain's Financial Conduct Authority and other regulators against six banks, including HSBC Holdings Plc (HKSE: 0005.HK - news) , in November. (Reporting By Karen Freifeld; Editing by Christian Plumb)