UK finance watchdog looks at new market-rigging claims

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The City watchdog is scrutinising a series of complaints over manipulation of a key contract used to price savings products and mortgages.

The complaints allege the systematic rigging of short-term interest rate contracts (Stirs) by traders on the London International Financial Futures Exchange (Liffe) in recent years.

The Financial Conduct Authority is looking into a number of complaints made by traders and former Liffe officials, including one passed to it from the Bank of England. The watchdog, which declined to comment, works closely with the central bank. However, it appears that regulators have stopped short of launching a full investigation into the claims of market abuse.

The Times reported that several current and former traders, including former Liffe officials, were concerned that large volume trades on Stirs could be placed in the market with no intention of being traded. The practices are said to be similar to the techniques used by Navinder Sarao, the “flash crash” trader. Trading videos seen by the Times show trades as large as 24,000 lots, with a notional value of £12bn, being placed and then rapidly withdrawn.

One Liffe trader asked Paul Fisher, who until last year was executive director responsible for markets at the Bank of England and is now deputy head of the Prudential Regulation Authority, to look into potential market manipulation of short sterling contracts. The complaint was passed on to the FCA.

The Bank said: “The Bank of England has robust escalation procedures in place for staff to follow if they are made aware of potential misconduct in financial markets. Paul Fisher, in his capacity as executive director of markets, drafted these procedures, which were approved by the executive and we have every confidence that he has followed them to the letter.”

Sarao faces extradition to the US after allegedly making $40m (£27m) in the “flash crash” of 2010. He allegedly played the world’s futures markets from his parents’ home in Hounslow, west London, and is accused of helping trigger the multibillion-dollar US stock market crash five years ago.

The financial world is still reeling from the Libor scandal, in which several major banks around the world have been fined for manipulation of the global benchmark rate. Deutsche Bank, Germany’s largest bank, was last week fined a record $2.5bn for rigging Libor and was ordered to sack seven employees.

Libor involved a panel of banks sending submissions about the price they expected to be charged to borrow from rival banks across a range of currencies. This process has been changed since the scandal erupted in 2012.

Powered by Guardian.co.ukThis article was written by Julia Kollewe, for theguardian.com on Friday 1st May 2015 10.23 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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