The Manipulation of the Forex Market: Its’ Long-term Legacy

When news of the alleged manipulation into the forex market first broke, it sent genuine ripples of shock and unrest all around the world. Taking in some of the largest banks, regulators and financial institutions across three continents, the scandal has gripped thousands of traders and triggered a wave of hysteria and considerable mistrust within the foreign exchange.

Multiple banks have subsequently been hit with recording breaking fines, with the cumulative total of financial sanctions initially reaching $3.4 billion. The financial cost goes far beyond these measures alone, however, as JP Morgan Chase recently became the first bank involved to settle civil lawsuits by agreeing to pay an estimated $100 million to U.S. counterparties, market participants and others who claim to have been harmed by manipulation and the subsequent volatility that it caused.

The Fall-out of Forex Market Manipulation: From Banks to Everyday Traders

The proactive approach of J P Morgan to settle these civil suits will place pressure on other parties implicated in the scandal, even though the precise details of the total settlement will not be published until the end of January. When you consider that this settlement must be paid in addition to the $660 million fine that was imposed on the bank by regulatory bodies and authorities, this represents a huge sum and requires an immediate financial commitment that not all implicated institutions will be willing to make at this time.

This is just the beginning of the fall-out, however, while it is fair to surmise that the impact of forex market manipulation reaches far beyond banks and brokers. Financial regulators have been among the first to face criticism, as they look to implement more stringent measures that can prevent such a scenario from unfolding in the future while also enabling traders to regain trust in them and the market itself. While some experts believe that aggressive and proactive regulatory guidelines will help to deter malevolent and traders and boost the market in the long run, others warn against the unintended consequences of creating a contrived trading environment and instead preach the virtues of allowing risk-mitigating measures to evolve organically over time.

This situation has hardly been helped by the initial proposals put forward by the Financial Stability Board (FSB), which came under fire last year after market experts claimed that they would simply paper over the initial cracks and mask underlying structural issues with the foreign exchange. From a traders’ perspective, this initial fall-out has seen many adopt a risk-averse approach and review the way in which they invest their hard-earned money. This has been reflected in a rising demand for peer-to-peer currency exchange platforms, which serves as an innovative, transparent and real-time trading solution that helps to negate the risks posed by a rigged market.

The Last Word for Traders and Future Market Stability

As these developments prove, it is not only banks and financial institutions that have suffered as a result of forex market manipulation. Regulators and brokers have also experienced criticism and falling demand for their services respectively, while everyday traders have been forced to seriously reconsider their appetite for risk and the wider investment strategy that they choose to implement.

This demographic are the genuine victims of forex market manipulation, and it will take a while for these individuals to regain trust in the worlds’ leading financial bodies and fiscal regulators. For now, however, it should be enough that the guilty parties have received a heavy financial sanction for their actions, while the desire of the market’s leading regulators and brokers to create an open and transparent infrastructure should also inspire hope and understanding among honest traders.