According to two unidentified sources, the US Securities and Exchange Commission is currently investigating whether there has been a manipulation of the pricing for options and exchange-traded funds in light of the benchmark foreign-exchange rate rigging allegations. The new investigation, said Bloomberg, adds up to the growing list of probes by global regulations to address the allegations of currency markets manipulation. The sources also added that the latest probe is currently still in its early stages.
Another person had also disclosed that the Commodity Futures Trading Commission is also looking into the potential securities pricing manipulation. Bloomberg said that the CFTC regulates foreign-exchange derivatives. CFTC and SEC reportedly share oversight of the derivatives being traded in the US foreign exchange market. Historically, the two agencies had jurisdiction over the derivatives that traded on exchanges and are tied to foreign currency rates. CFTC has joined the US Justice Department, Federal Reserve, Office of the Comptroller of the Currency and New York's top banking regulator to investigate alleged manipulations.
Securities law professor John Coffee at Columbia University thought that the new probe made sense. He told Bloomberg, "Any corporation with global operations has to hedge currencies using futures and swaps. If the FX market is manipulated, it can create a loss that is passed on to the consumer and shareholders."
The new probe seemed to be alarming too, postulated the news agency. SEC's involvement, whose one of its responsibilities is to regulate certain securities that are tied to foreign exchange rates, shows the effect of the manipulation across financial products.
It has been said that global authorities from London to New York had reached out to a minimum of a dozen banks to confirm whether dealers did indeed share information about their clients' orders to rig benchmark spot rates for foreign currencies. Bloomberg said that derivatives, which include options, made up of more than half of the foreign exchange market valued at $5.3 trillion in daily transactions.
