PA trading is a grey area – while not explicitly prohibited by regulators such as the FCA, most banks have their own guidelines and restrictions in place. Traditionally these have banned or limited traders' ability to deal in FX on their own account, except in specific compliance-approved special situations. Whether or not sales people at FX desks are bound by similar rules is less clear cut.
The rumours about PA trading suggest that one FX professional who has recently left the market did so under suspicion that he had been trading on his personal account in front of big trades being executed by the desk. These trades were not related to the 4pm fix.
Now rumours have spread to the actions of an unnamed senior trader at a big FX house, who was allegedly executing unauthorized trades through a broker worth 10k a pip. In markets priced to four decimal points, that constitutes positions of as much as $100 million.
The trades – and whether or not investigations will reveal more of the same – are the talk of trading floors in London already febrile with intrigue and fear over the current investigations into alleged malpractice in foreign exchange.
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The market tremors from the FX-fixing scandal and subsequent probe – triggering a flurry of fines, litigation cases and prosecutions – is set to reverberate for years to come. Euromoney investigates the fallout for global banks and possible reforms.