US offers immunity to forex traders

By Daniel Schafer and Caroline Binham in London and Kara Scannell in New York

UNITED STATES prosecutors are offering immunity deals to junior traders in London as they try to gather evidence against banks and more senior staff in the investigation into alleged currency market manipulation.

US Department of Justice staff have flown to the United Kingdom to interview foreign exchange traders, who have been offered partial immunity in exchange for volunteering information about superiors, people familiar with the situation said.

Such "proffer agreements" allow people to give authorities information about crimes with some assurances they will be protected against prosecution, as long as they do not lie.

The move marks another step in the global investigation into collusion and market-rigging in the US$5.3tn a day currency market by at least 15 regulators and prosecutors. They are investigating allegations that bank traders and sales staff used chat rooms and other means of communication to share client information and manipulate daily currency benchmarks.

Most authorities initially gave banks free rein to conduct their own probes, prompting the suspension, placing on leave or firing of almost three dozen staff at 10 banks and the Bank of England, where one official has been suspended.

One senior lawyer said the DoJ probe was well-advanced. The DoJ declined to comment. Referring to general criminal activity, Leslie Caldwell, its criminal division chief since May, told the Financial Times last week that the authority would be "appropriately aggressive" and seek to bring "timely" cases against financial bodies.

Another lawyer said that while the DoJ had offered immunity deals to some traders, most had declined as they did not have "killer evidence" to trade against leniency.

The regulatory probes, as well as a slump in revenues and a move towards more automated trading, has created a sense of frustration among senior traders this year that has prompted many to retire or move from banks to hedge funds.

Roger Bohler, chief dealer at UBS in Connecticut, has been the latest senior trader to leave his employer, people close to the situation said. The reasons for his departure are not known. Mr Bohler could not be reached for comment. UBS declined to comment.

Senior bankers fear the forex probes will prompt another round of multibillion dollar penalties, echoing the Libor-rigging scandal, which has cost the industry $5.8bn in fines.

It is clear from some banks' internal probes that there have been instances of traders sharing information about overall trading books, individual client orders and the spreads they are charging, several people close to the situation have said.

German and Swiss regulators have said they have found evidence of wrongdoing.

Additional reporting by Sam Fleming in London

(c) 2014 The Financial Times Limited