Banks being probed over automated forex deals, report says

Wall Street banks may face further damaging allegations about their rigging of foreign exchange markets, as New York’s banking regulator intensifies a probe into electronic trading, according to the Financial Times.

The New York Department of Financial Services has become increasingly convinced that banks have been abusing forex markets through automated trades driven by algorithms, the newspaper cited people familiar with the situation as saying.

Findings from the probe – which could see the total penalties exceed the $10bn already paid – point to more widespread market abuse than US and UK authorities disclosed on Wednesday in detailing their settlement with six global banks, the FT added.

The newspaper’s sources said that the $5.6bn settlement related to allegations of manipulation in the spot forex market, whereas the DFS' probe covers electronic trading, which accounts for the majority of forex transactions.

Trading platforms at Barclays and Deutsche Bank are being scrutinised by the DFS and the regulator has also subpoenaed information from BNP Paribas, Credit Suisse, Goldman Sachs and Societe Generale.

The DFS’ investigation into Barclays is the most advanced and several bank employees have been called to give evidence, according to sources cited by the FT.