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HKMA announces outcome of FX investigation 

The Hong Kong Monetary Authority (HKMA) announced today the outcome of its investigation into the foreign exchange (FX) trading operations of ten banks in Hong Kong (Note 1).  The aim of the HKMA investigation was to ascertain whether the banks concerned and/or their staff in Hong Kong had engaged in any rigging of FX benchmark fixings, collusion, and/or other inappropriate activities during the period from 2008 to 2013 (Note 2).  

The investigation applied the methodology adopted by overseas regulators for similar investigations.  The banks were required to appoint external legal firms to examine relevant communication records for the period concerned and report their findings to the HKMA for further review.  In total, about 40 million internal and external communication records including chat messages of the bank staff involved in FX benchmark fixings or trading operations were covered in the process.  Inquiries and interviews with relevant staff as well as trade data analysis were also conducted.  

The HKMA investigation found no evidence of collusion among the banks investigated and no evidence of any rigging of the benchmark fixing of Treasury Markets Association (TMA) FX rates (Note 3) in Hong Kong.  The investigation also found no evidence of any rigging of FX benchmark fixings of other jurisdictions except for a case of suspected attempt to influence an Asian currency benchmark fixing.  This involved a Hong Kong-based trader making requests to his colleague in the jurisdiction concerned to influence the benchmark fixing in that market.  However, there was insufficient evidence to find that the colleague in question actually effected trades in an attempt to rig the fixing (Note 4). 

As regards FX trading, the investigation discovered a case involving a failed attempt by a Hong Kong-based trader to influence the USD/HKD spot rate (not the TMA Spot USD/HKD Fixing) at the request of his colleague in another Asian market (Note 5). 

The investigation also identified certain control deficiencies resulting in some isolated cases of communication indiscretions that involved the disclosure of possible counterparties’ or clients’ information to other banks (Note 6).  Nevertheless, no evidence of market manipulation was found. 

In the light of the above investigation findings, the HKMA has: -

1.  in respect of the traders involved in the two cases of inappropriate conduct mentioned in Note 4 and Note 5:-

(a)  required the banks concerned to take appropriate actions against the traders and to report the same to the HKMA; and

(b)  referred the cases, including the identity of the traders involved, to the relevant overseas authorities for their possible follow up actions;

2.  in respect of the two banks involved in the two cases of inappropriate conduct mentioned in Note 4 and Note 5, required the banks to:-

(a)  engage an independent external reviewer to (1) find out the root cause of the incident concerned, including its implications on the effectiveness of the relevant internal controls and management oversight and (2) make recommendations to ensure that such controls and oversight are adequate to prevent and detect misconduct and irregularities by traders; and report the results to the HKMA;  and

(b)  implement the recommendations made by the reviewer within a timeframe and in a manner agreed with the HKMA; 

3.  in respect of the banks found to have control deficiencies mentioned in Note 6:-

(a)  required the banks (except for the banks which do not now have a FX trading desk in Hong Kong) to

(i)  conduct an assessment of whether their current internal controls are sufficient to ensure compliance with the TMA’s Code of Conduct and Practice and to identify appropriate additional measures to be implemented, and report the results to the HKMA; and

(ii)  implement the additional measures (if any) within a timeframe and in a manner agreed with the HKMA; and

(b)  required the banks concerned to consider taking appropriate actions against the traders involved in any communication indiscretions and to report the same to the HKMA. 

A spokesperson of the HKMA said, “While no rigging of Hong Kong FX benchmark fixings was found in the investigation, we remind banks to be vigilant to ensure the integrity of the FX market in Hong Kong which is of utmost importance to Hong Kong as an IFC.  In addition, the HKMA expects all banks to maintain adequate systems of control to ensure that their staff engaged in FX trading activities observe the TMA’s Code of Conduct and Practice.  Banks should uphold high standard of integrity and should promote a culture of ethical conduct among their staff.  Manipulative practices will not be tolerated.”  The spokesperson added, “The HKMA will continue to closely monitor the outcomes of the required actions to ensure that the intended results are achieved.” 

It is noted that some overseas regulators / authorities are following up on certain matters (e.g. anti-trust issues which are outside the scope of the HKMA investigation).  As the situation evolves in these jurisdictions, the HKMA may need to follow up on their findings, as appropriate. 



(1)  The HKMA commenced its investigations into the 10 banks after receiving relevant information from banks and overseas regulators.  The 10 banks are Bank of America, Barclays Bank, BNP Paribas, Citibank, Deutsche Bank, HSBC, JPMorgan Chase Bank, Royal Bank of Scotland, Standard Chartered Bank, and UBS.

(2)  The periods covered in the HKMA investigations are consistent with those of other overseas regulators’ investigations.  

(3)  TMA FX Fixings comprise Spot USD/HKD Fixing, Spot USD/CNY (HK) Fixing and CNY NDF Fixing (which was discontinued from 1 April 2014).  During the relevant period, these fixing rates were calculated by averaging the middle quotes after excluding a number of the highest and the lowest quotes from the contributing banks appointed by the TMA.

(4)  A Hong Kong-based trader of Standard Chartered Bank was suspected of attempting to influence the benchmark fixing of one of the Asian currencies in the relevant market from March 2009 to November 2010 by issuing nine chat messages to his trader colleague in the bank’s overseas branch for the purpose of benefiting his forward position.  However, there was insufficient evidence to find that the colleague actually effected trades at the material time in an attempt to rig the relevant fixing.

(5)  This involved the attempt by a Hong Kong-based trader of Deutsche Bank at the request of an overseas trader colleague of the bank to influence the USD/HKD spot rate (not the TMA Spot USD/HKD Fixing) in March 2009 for the purpose of making a gain in an OTC currency option booked in an overseas jurisdiction.  The traders failed to achieve their intended result. 

(6)  The investigation revealed certain control deficiencies among the 10 banks.  Such deficiencies resulted in some communication indiscretions by traders of six banks (namely Bank of America, Citibank, Deutsche Bank, HSBC, JPMorgan Chase Bank and Royal Bank of Scotland) in which possible counterparties’/clients’ information was disclosed to other banks.  It was claimed that the purpose of such disclosure was to share information on market conditions.  Although the number of such communications was not large and there was no evidence of manipulation, such conduct is nevertheless inappropriate.  It is noted that the banks concerned have, in the past few years, made enhancements (such as putting in place transaction monitoring tools and conducting periodic reviews on traders’ communications) in line with international trend.


Hong Kong Monetary Authority
19 December 2014

Last revision date: 19 December 2014
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