Currency trading 101: How did banks manipulate currency

Competition Commission has referred a collusion case to the Competition Tribunal for prosecution against 17 banks, including three of South Africa's big banks, Absa, Standard Bank and Investec.

The Commission has been investigating a case of price fixing and market allocation in the trading of foreign currency involving the rand and dollar since April 2015.

How does currency trading work? How can one collude? What are the consequences on the economy?

Eusebius McKaiser finds out from Rand Swiss portfolio manager and market commentator, Gary Booysen, and Financial Mail deputy editor, Rob Rose.

Listen to the full interview below for more information and scroll down for quotes from parts of it...

Rand Swiss portfolio manager and market commentator, Gary Booysen,

Financial Mail deputy editor, Rob Rose,

What's forex trading?

Essentially, currency trading is taking one currency and converting it to another currency.

Gary Booysen, Rand Swiss portfolio manager and market commentator

Why do banks trade currency with each other?

Booysen says there are many reasons why banks practice currency, one being helping importers and exporters.

Banks would help customers either hitch positions if you are an import and export and want to create a contract to try and fix your price of currency, but to say I need a Rand/Dollar exchange at this level because I'm going to import these many cars from Korea and I need to fix the price so that I can plan my budgeting.

Gary Booysen, Rand Swiss portfolio manager and market commentator

What are the banks accused of?

Rose explains that there are many ways banks allegedly colluded, and here is one reason.

They colluded to say let's all offer our clients this amount of spread. If you are in a competitive market, and a client comes to you and says I want to change this and rate and spread is bad, a client will go to another bank. But if the other banks agrees to keep their rates to the same level, it manipulates supply and demand, and actually value client gets.

Rob Rose, Financial Mail deputy editor

702 welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the 702 community a safe and welcoming space for all.

702 reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

702 is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
Gauteng ANC throws weight behind Gordhan, questions Molefe's appointment

Gauteng ANC throws weight behind Gordhan, questions Molefe's appointment

ANCYL wants Finance Minister Pravin Gordhan fired following bank collusion scandal.

The closing of Oakbay's bank accounts proves collusion by the banks - Maphatsoe

The closing of Oakbay's bank accounts proves collusion by the banks - Maphatsoe

Maphatsoe says there should be a harsher punishment for 17 international and local banks who colluded to manipulate currency trades

ANCYL calling for Pravin Gordhan to go (just days before budget)

ANCYL calling for Pravin Gordhan to go (just days before budget)

EWN Reporter Clement Manyathela reports that the ANC Youth league want the current finance minister 'redeployed' out of Treasury.

Bank collusion may have made rand stronger - financial analyst

Bank collusion may have made rand stronger - financial analyst

Intellidex financial analyst, Stuart Theobald, says it's difficult to measure the impact of currency manipulation by 17 banks.

Treasury labels bank's collusion as "unbridled greed"

Treasury labels bank's collusion as "unbridled greed"

17 banks, accused of collusion and insider trading could be fined 10% of their revenue should they be found guilty.

Alleged bank collusion may have increased volatility of rand - economist

Alleged bank collusion may have increased volatility of rand - economist

Currency traders from across the world reportedly used many platforms to distort the market in a case of bank collusion.

Timing of bank collusion case can't be ignored-  political analyst

Timing of bank collusion case can't be ignored- political analyst

Competition Tribunal to investigate 17 major banks for currency manipulation, at a time when Gupta family was in the spotlight.

Popular articles
So what exactly is radical economic transformation?

So what exactly is radical economic transformation?

Wits associate professor of economics Christopher Malikane speaks to Azania Mosaka about the term that is being bandied about.

Last chance for Spur's 2-for-1 burger special this Monday

Last chance for Spur's 2-for-1 burger special this Monday

Monday (March 27) is your last chance to sink your teeth into the popular burger special which Spur will discontinue from April.

Shop 'til you drop: The top 'Black Friday' deals this week

Shop 'til you drop: The top 'Black Friday' deals this week

Start your Christmas shopping off with a bang at these major retailers offering some impressive discounted sales for Black Friday.

'The university degree is dead'

'The university degree is dead'

Flux Trends founder Dion Chang gives five reasons why he believes getting a degree is past its sell by date.

3 easy questions could bag you R2000!

3 easy questions could bag you R2000!

WIN R2000! But only if you can prove you're a whiz of the MTN Biz Quiz by answering the following three questions...

Blesserfinder: Matching you with a sugar daddy near you

Blesserfinder: Matching you with a sugar daddy near you

Is social trend Blesserfinder, where girls are allegedly matching up with rich 'benefactors' in exchange for sex, a real thing?

5 ways the NSFAS funding model will change in 2017

5 ways the NSFAS funding model will change in 2017

The National Student Financial Aid Scheme (NSFAS) will pilot a new funding model in 2017. NSFAS chairperson Sizwe Nxasana explains.