- Forex volume trades rigged by the top ten banks
- Top players often collude and manipulate the market
- Cryptocurrencies can bring sanity to the banking industry by eliminating the middleman
A group of institutional investors filed a suit against 16 major banks accusing them of manipulating the market prices. The plaintiffs took the step after opting out of a collecting litigation process to sue on their own.
The plaintiffs that include BlackRock Inc and Allianz SE’s Pacific Investment Management Co filed suit on Wednesday, November 7, 2018, in the U.S. District Court in Manhattan against the banks, who they accuse of manipulating the lucrative $5.1 trillion-a-day foreign exchange market.
Banking Giants being Questioned
The banks mentioned in the suit are Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Japan’s MUFG Bank, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered, and UBS. The 221-page complaint states:
“By colluding to manipulate FX prices, benchmarks, and bid/ask spreads, defendants restrained trade, decreased competition, and artificially increased prices, thereby injuring plaintiffs.”
Of the $5 trillion traded in Forex markets daily, over 50 percent is traded by large banks with nearly 80 percent going to ten biggest banks. For instance, in 2017 Citi took the lion’s share of the interbank FX trade with 10.7 percent followed by J.P. Morgan with 10.3 percent; both banks trade at least $500 billion worth of forex.
If both banks open opposite positions in a trading counter the position taken by the other big players will determine the net movement. However, in most cases, the top players collude and place their orders in the same direction thereby manipulating the market as it happened in 2007 and 2013.
It should be remembered that it’s almost impossible to conduct seamless transactions that are accessible and trusted. Using cash, credit and bank wires does a complete disservice to consumers by living them in the hands of manipulative banks.
Crypto to the Rescue?
Cryptocurrencies have hijacked the banking system by introducing a feasible transactional process that guarantees every transaction. The universal adoption of blockchain technology and cryptocurrencies can bring sanity to the banking industry by eliminating the middleman (in this case the banks), who is entitled an unnecessary role in the scheme.
Many of the plaintiffs, in this case, are planning to pursue similar litigation in London against many of the bank defendants regarding trades in Europe, for manipulation done using names like “The Cartel,” “The Mafia” and “The Bandits’ Club,” through tactics with such names as “front-running,” “banging the close,” “painting the screen” and “taking out the filth.”