Currency dealers in London gave information about client orders to day traders who then made bets on their behalf, sidestepping restrictions on personal trading, three people with knowledge of the practice said.
Bloomberg reports that bank employees used their mobile phones and instant-messages to transmit details of impending orders to individuals working from rented trading desks in offices on the outskirts of the U.K. capital, according to three traders who said they had witnessed the practice over a period of years.
The day traders then made bets on the direction of currencies and any profit was later divvied up in cash, said two of the people, who asked not to be identified because the agreements are private.
The practice shows the extent to which dealers would go to circumvent rules designed to stop them from profiting at the expense of clients, and how alleged wrongdoing in the foreign-exchange market stretched beyond the trading floors of London’s financial district to unregulated day traders in Essex and Kent.
'It’s almost impossible for banks to have a lid on it – unless they find a way of controlling all forms of communication out of the trading floor', said Tom Kirchmaier, a fellow in the financial-markets group at the London School of Economics.
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