Forex Manipulation

Forex (FX) manipulation usually involved the currency department of banks or investment houses.

It is not an easy feat to manipulate the forex market as the volume and liquidity of the market is exceptionally high. However, it still possible for traders to change the value of a currency to make a profit.

Foreign exchange players found it useful to take a snapshot of how much is being bought and sold.

Until recently, this happened every day in the 30 seconds before and after 16:00 in London, and the result is known as the p.m. fix or just the fix.

Many other markets have daily fixes also. This is the time that central banks would fix or assign a price or value to their currency.

The fix is incredibly essential, as it is the peg on which many other financial markets depend.

The fix today has been adjusted to make currency and market manipulation more difficult.

Is Forex Manipulation a Growing Concern?

With faster and more powerful computer systems, it is challenging to stay ahead of market manipulators even though the practice is against the law.

Traders could move the value ahead of the fix by submitting a large volume of orders. This can change the impression of supply and demand and therefore change the price.

Traders have been known to share client orders and positions to affect market value.

Since these violations became known, the window has been changed to five minutes to make it harder to manipulate.

The government authorities say that some of the banks and investment clients have been hurt as they have been on the wrong side of a skewed market.

This could harm pension funds and other large investment as the manipulation has only a slight effect on the price but enough that large players can suffer large losses.

FX manipulation also undermines the trust in banks and financial services, which over the years, have been rocked by these types of scandals.