This is the largest financial penalty ever imposed by the FCA, or its predecessor the Financial Services Authority (FSA).
http://www.fca.org.uk/news/fca-fines-barclays-for-forex-failings
Barclays’ failings
Barclays’ controls over its FX business were inadequate and ineffective. It primarily relied on its front office FX business to identify, assess and manage the relevant risks – however the front office failed to pick up on obvious risks associated with confidentiality, conflicts of interest and trader conduct.
Some of those responsible for front office management were aware of and/or at times involved in this misconduct, reflecting a failure to embed the right values and culture in Barclays’ FX business. Barclays’ control and risk functions failed to challenge effectively the management of these risks in the FX business.
Barclays engaged in collusive behaviour in which traders from different banks, including Barclays, formed tight knit groups and communicated through electronic messaging systems including chat rooms. Certain groups described themselves or were described by others using phrases such as “the players” – one chat room participant referred to himself and others in the chat room as “the 3 musketeers” and commented “we all die together”.
The information obtained through these groups helped traders determine their trading strategies. They then attempted to manipulate fix rates and trigger client “stop loss” orders (which are designed to limit the losses a client could face if exposed to adverse currency rate movements).
This involved traders attempting to manipulate the relevant currency rate in the market, for example, to ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate at which it had bought that currency in the market to ensure a profit for Barclays.
Barclays’ control failings also meant that traders had the opportunity to benefit Barclays’ trading positions in FX options by attempting to manipulate fix or spot FX market rates to prevent Barclays’ clients from receiving pay-outs from the options they had purchased from Barclays.
The FCA also found examples of inappropriate sharing of confidential information by spot FX traders and sales staff, including sharing client identities and information about client orders. Disclosing these details gave other market participants more information about the activity of Barclays’ clients than they would otherwise have had, creating significant potential for client detriment.
The failings in Barclays’ FX business persisted despite similar control failings in relation to Libor and the Gold fixing, which were the subject of previous FSA and FCA enforcement actions. Although Barclays made some improvements following these enforcement actions, it failed to take adequate steps to address the underlying root causes of the failings in its FX business.
http://www.fca.org.uk/news/fca-fines-barclays-for-forex-failings
Barclays’ failings
Barclays’ controls over its FX business were inadequate and ineffective. It primarily relied on its front office FX business to identify, assess and manage the relevant risks – however the front office failed to pick up on obvious risks associated with confidentiality, conflicts of interest and trader conduct.
Some of those responsible for front office management were aware of and/or at times involved in this misconduct, reflecting a failure to embed the right values and culture in Barclays’ FX business. Barclays’ control and risk functions failed to challenge effectively the management of these risks in the FX business.
Barclays engaged in collusive behaviour in which traders from different banks, including Barclays, formed tight knit groups and communicated through electronic messaging systems including chat rooms. Certain groups described themselves or were described by others using phrases such as “the players” – one chat room participant referred to himself and others in the chat room as “the 3 musketeers” and commented “we all die together”.
The information obtained through these groups helped traders determine their trading strategies. They then attempted to manipulate fix rates and trigger client “stop loss” orders (which are designed to limit the losses a client could face if exposed to adverse currency rate movements).
This involved traders attempting to manipulate the relevant currency rate in the market, for example, to ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate at which it had bought that currency in the market to ensure a profit for Barclays.
Barclays’ control failings also meant that traders had the opportunity to benefit Barclays’ trading positions in FX options by attempting to manipulate fix or spot FX market rates to prevent Barclays’ clients from receiving pay-outs from the options they had purchased from Barclays.
The FCA also found examples of inappropriate sharing of confidential information by spot FX traders and sales staff, including sharing client identities and information about client orders. Disclosing these details gave other market participants more information about the activity of Barclays’ clients than they would otherwise have had, creating significant potential for client detriment.
The failings in Barclays’ FX business persisted despite similar control failings in relation to Libor and the Gold fixing, which were the subject of previous FSA and FCA enforcement actions. Although Barclays made some improvements following these enforcement actions, it failed to take adequate steps to address the underlying root causes of the failings in its FX business.
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