UK bank hit with $150 million fine – told to fire employee

Barclays fined $150m for electronic FX trading misconduct

From Finextra –

“Barclays has been slapped with a $150 million fine by New York State’s financial regulator and told to fire an employee over an automated system used to reject unprofitable client orders on its electronic foreign exchange trading platform.

Barclays employed a system called 'Last Look' on its FX trading platform which placed a milliseconds-long hold period between a client placing an order and it being executed by the bank.

The delay was designed to be a defensive bulwark against high-frequency traders using their more nimble systems to outflank market makers like Barclays and acting on price information with "toxic flow" orders”.

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BoE archives reveal little known lesson from the 1974 failure of Herstatt Bank

From Bank Underground –

“In June of 1974, a small German bank, Herstatt Bank, failed. While the bank itself was not large, its failure became synonymous with fx settlement risk, and its lessons served as the impetus for work over the subsequent three decades to implement real-time settlement systems now used the world over. Documents from the Bank of England’s Archive shed light on a lesser known aspect of Herstatt’s failure – the chain reaction it caused across financial centres as banks in different countries delayed settling their payments to each other. The lesson for policymakers today to grapple with is: when a bank fails, could we still expect surviving banks to delay making payments, with a potential chain reaction in the payment system?

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Banks brace for more foreign exchange rigging exposure as civil lawsuits emerge

From YAHOO! Finance –

“Class-action cases are expected to follow vast fines for manipulating currency benchmarks.

Banks are bracing for hundreds of millions of pounds in new claims for foreign exchange manipulation from class-action lawsuits triggered by last week’s vast market rigging fines .

Barclays, Royal Bank of Scotland and four other banks were ordered on Wednesday to pay $6bn (£3.84bn) by UK and US authorities.

The Barclays penalty represents the biggest bank fine in British history.

The regulators, detailing how traders gathered in chatrooms using monikers such as “The Cartel” and “Coiled cobra” to rig the $5.3 trillion-a-day currency market, also forced the banks to plead guilty to criminal charges.

Lawyers say that the fines, as well as an investigation from the European Commission, could be a springboard to damaging civil litigation in the UK and Europe.”

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