Regulators widen global probe into $5-trillion-a-day forex market

As probe grows wider, some groups of traders have come under the scanner for possible maneuvering in rupee traders

As a global probe into suspected manipulations in forex markets widen, some groups of traders have come under scanner for possible maneuvering in rupee trades, which clock an average daily volume of over $50 billion globally.

These groups have been found to be using monikers like 'The Cartel', 'The Dream Team', 'The Bandits' Club' and 'The Club' on various online forums, instant messaging platforms like WhatsApp and BlackBerry Messenger and are suspected to be engaged in manipulation of numerous foreign exchange rates.

The manipulation is suspected to have spread across the world, including the developed markets like the US, the UK, Switzerland and Europe and Asian nations like India, Singapore, Hong Kong and Indonesia.

According to sources, regulators from across the world, including in India, are cooperating with each other in the probe into the worldwide forex markets, which, according to some estimates, clock trades worth $5.3 trillion a day.

This includes trades worth over $50 billion a day involving Indian rupee, although nearly half of these trades take place outside India and in markets like London, Singapore, Dubai, Switzerland, the UK, Hong Kong and the US.

The manipulations are suspected to have taken place in both spot market rates and the forward markets, although Indian regulators do not have any jurisdiction over rupee trades taking place outside the country.

Within India, RBI regulates spot forex markets, while currency derivatives market is regulated by Sebi.

Those suspected to be involved in possible manipulations include some forex traders, as also certain Swiss banks and other European financial institutions, while it is unlikely that any Indian bank or financial services firm might be directly involved, sources said.

The issues being probed include possible cartelisation among banks, mostly from Switzerland and some other European countries, in manipulating foreign exchange rates, as also other manipulative practices adopted by forex traders.

In most likelihood, the possible manipulation in rupee trades might have taken place outside India, although the role of certain executives at Indian branches of suspected European banks might not be completely ruled out, they added.

The concerns about large NDF (Non Deliverable Forward) forex market trades in rupee outside India recently came to the fore after a sharp plunge in rupee value in recent months.

Rupee had slipped to a life-time low of 68.85 in August, although it has bounced back to near Rs 61 level now.

The NDF is a foreign exchange derivative instrument traded over-the-counter. It is operated in currencies that are not freely convertible such as the rupee. The market enables hedging of exchange rate risks, irrespective of any restrictions arising in the currency of origin.