HSBC Braces for More FX Rigging Pain as Traders Charged with ‘Front-Running’

The prosecutor wants HSBC to disclose its interbank dealing tickets and any relevant Bloomberg instant messages.

European banking giant HSBC is bracing itself in anticipation of new claims amounting to several millions of pounds over foreign exchange manipulation, after a fresh class-action lawsuit was triggered by ECU Group, a UK-based currency investment firm, according to the Financial Times.

ECU Group has sued Europe’s largest lender by assets in London, asking for HSBC to disclose internal records centering on three large forex orders that it executed in 2006.

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The investment firm detailed how HSBC’s traders allegedly used a technique known as ‘ramping’ that caused the prices to spike, benefiting the bank’s trading book at the expense of the client.

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The court filing, seen by the FT, noted that ECU Group placed three stop-loss trades, each worth over $100 million, and each time the exchange rate rose sharply up to the trigger level before quickly retreatןמע to normal levels. The price spikes caught the attention of the firm, which suspected that it was being ripped off by HSBC traders.

ECU believes that this market manipulation, pulled off through traders’ coordinated transactions and exchange of confidential customer information, caused the firm to pay higher prices than they would have in a competitive market.

The company wants HSBC to disclose its interbank dealing tickets, deal log entries and any relevant Bloomberg instant messages for the three trades, including those of its London and New York proprietary trading desks. In addition, it is asking that all documents relating to the bank’s internal investigations carried out 11 years ago on ECU’s request are revealed.

The new charges could cause more damage to the reputation of the global bank’s forex trading business and even fuel more calls for HSBC to face full criminal charges. Several class-action lawsuits have been filed and settled against HSBC and other lenders, with banks paying out hundreds of millions in compensation.

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