News About Banking Industry

Barclays to pay additional $150M ForEx penalty

NEW YORK British banking giant Barclays (BCS) will pay an additional $150 million penalty and fire a top official over misconduct related to foreign-exchange currency trading, a New York financial regulator said Wednesday. The fine stems from evidence that Barclays in some cases used its electronic foreign-exchange trading system to automatically reject client orders that would prove unprofitable for the bank based on price swings during milliseconds-long hold periods, the New York State Department of Financial Services said.barclaysbankannouncesprofitsjacjldjcx9cl

Barclays didn’t tell clients why the trades had been rejected. Customers who inquired were instead told the rejections stemmed from technical issues or given vague responses, the state regulator said. Combined with previous penalties, the London-based bank has now paid $635 million to the New York regulator for alleged manipulation and other misconduct involving the world’s $5.3-trillion-a-day foreign-exchange market.

“This case highlights the need for greater oversight and action to help prevent the misuse of automated, electronic trading platforms on Wall Street which is a wider issue that requires serious additional scrutiny,” said Anthony Albanese, acting superintendent of the regulator that oversees Barclays’ U.S. operations. Barclays said the civil fine will be reflected in its fourth-quarter financial results. The bank also said it continues to cooperate with other investigations and manage related litigation risks.

The latest penalty stems from the New York regulator’s investigation of Barclays’ electronic trading platform for the foreign-exchange market. Called BARX, the system allows traders to execute foreign-exchange with the bank. Powerful automated technology in some cases enables traders to spot and exploit tiny delays in the flow of foreign-exchange data by requesting trades based on information that Barclays and other banks might not yet have received. For instance, the trading systems might detect market movements milliseconds before the bank’s own electronic platform picked up the information and adjusted prices to account for the changes.