What is a Dealer Bond?

A trader is a profession that earns spread profits through buying and selling. A trader can refer to either a trader or a dealer. As a trader, a trader is a general trading institution or individual, and can be a commissioned party to a trading institution. It can carry out the buying and selling operations of financial varieties such as stocks and futures. Although bank foreign exchange traders also use the English word Dealer, Dealer also means that casino dealers and financial markets play the role of marketers (Dealers) for ordinary traders.

Traders

Generally, a trader is a person who acts as a trustee or trades for the other party in a transaction. Place buy or sell

1.Follow the trend

Trends are friends of traders, and only by following trends can you make big money.

2.Strict stop loss

Funds are the life of a trader, and each order only has a strict stop loss in order to have it when the real market comes.

First, the principle of initiative.

Use your own initiative to get in and out

Bloomberg reported on Tuesday that according to market makers from five banks, traders from major global banks have manipulated spot exchange rates for at least a decade, which has changed the value of trillions of dollars of investment. The exchange rate benchmarks involved include WM / Reuters Closing Spot Rates, which provide daily benchmarks for portfolio valuations. British regulators are considering investigating allegations of currency manipulation. ^[1]

Global benchmark exchange rate WM / Reuters is manipulated

Bloomberg's report shows that the benchmark exchange rate being manipulated is WM / Reuters, an exchange rate index born in 1994 that provides fund managers with a standardized exchange rate index to calculate daily net asset value. The benchmark exchange rate is divided into two types: spot closing and forward closing. Some major global stock and bond index suppliers (such as FTSE FTSE and MSCI) include the WM / Reuters exchange rate as a calculation factor, so it is very small. Exchange rate fluctuations can affect the investment value of about 3.6 trillion US dollars of funds tracking various indexes, from pension funds to structured wealth management deposit accounts.

The report said that several current and former traders pointed out that employees of these banks tried to control a set of benchmark indicators known as WM / Reuters interest rates by launching a large number of transactions before the 60-second window determined by the indicators, and conducted advanced transactions To exploit the due profit of customer orders. Because the final fixed exchange rate is calculated based on the median value of all transactions in these 60 seconds, several smaller trading orders may have a greater impact than a large-scale trading order.

Traders share the details of trading orders with the traders of brokers and other market makers, which will allow them to gather strength to change the WM / Reuters benchmark index in the desired direction. Some traders said that this strategy is more suitable for some currencies with a small trading range, but it still has risks. For example, during the last 60-second window period, some breaking news occurred, and some banks with larger trading positions may push the index back to the opposite direction.

Due to the controversial nature of this industry practice, sources have asked to remain anonymous. Two sources who have been in the business for more than 20 years say that many brokers work with industry counterparts to increase their chances of manipulating interest rates.

Two traders said that this kind of behavior happens every day in the spot foreign exchange trading market and lasted at least ten years, affecting the value of a large number of funds and financial derivatives.

A trader said that this strategy is very risky and he will only try it if he clearly understands the size of other banks' positions and the volume of customer transactions. Under normal circumstances, it is necessary to place an order of more than 200 million Euros to make the exchange rate index change.

FCA prepares to investigate

Earlier, Europe's largest fund management company had complained to British regulators in the past that WM / Reuters may be manipulated, and the Financial Market Conduct Authority (FCA) is preparing to investigate this.

The report said that after three major banks were fined $ 2.5 billion for manipulating the London Interbank Offered Rate, the Financial Market Conduct Authority has worked with regulators around the world to evaluate the fairness of benchmark indicators, including these Interest rate indicator used to determine the prices of derivatives and commodities. Regulators also launched investigations into benchmark indicators used in the crude oil market and the swap market.

A spokesman for the Financial Market Conduct Authority said in response to questions about the WM / Reuters interest rate that "the regulator is aware of these allegations and has discussed them with the relevant parties."

Forex exchanges and money market dealers' associations ACI pointed out in a statement on Wednesday that members had been reminded in a February guide that brokers should not "use or seek to use confidential information for profit" . Paris-based ACI has 13,000 members in more than 60 countries.

A veteran trader who has worked in a bank for more than 12 years described the foreign exchange market as the wild and desolate West. The foreign exchange market with an average daily trading volume of 4.7 trillion U.S. dollars is the largest market in the financial system and the one with the weakest supervision. Due to the implementation of the over-the-counter trading system, traders have decided to give priority to executing trading orders for clients or let their own Conflicts of interest will inevitably arise when the "rat warehouse" benefits.

As a market maker, the bank quotes the buying and selling prices for customers to conduct transactions, while using its own account to control liquidity. Institutional investors, including asset managers, buy and sell foreign exchange with banks within a period of time after the WM / Reuters close, usually at 4 pm London time, which gives traders the ability to adjust their positions and manipulate WM / Reuters to make a profit Opportunity. Some index funds are most susceptible to this, because these funds need to use WM / Reuters closing prices to make thousands of transactions with banks every day.

Arun Srivastava, a partner at legal advisory firm Baker & McKenzie LLP, said that for foreign exchange traders, buying a currency at the current market price and completing delivery within two days, the regulator did not define this behavior as a financial instrument Trading, so it may be difficult to prosecute forex traders for manipulating the market.

Unlike Libor's pricing, WM / Reuters is the closing exchange rate based on actual order orders. Of all the banks participating in the global foreign exchange market, 4 banks are the masters, and their market share is ranked by Deutsche Bank (15.2 %), Citibank (14.9%), Barclays (10.2%) and UBS (10.1%). Spokesmen for the four banks declined to comment.

Inventory scandals in the past two years

Looking back at the news over the past two years, investors can actually find that in this market, manipulation is everywhere.

Reports on manipulation events and related markets:

WM / Reuters-exchange rate

Libor-interest rate

Platts-spot oil prices

ISDACDS

JPMorgan Chase-Power Market

JPMorgan Chase-Gold and Silver

High-frequency trading and black pools-stock market

Louis Davos-Cotton

Of course, if we want to dig deeper, compared with the secret intervention of central banks in various countries, some manipulation incidents of financial institutions are actually small witches. Some analysts said: "We also know that the Federal Reserve and other central banks around the world are fully manipulating the U.S. debt interest rate curve through measures such as zero interest rates and QE, and injecting trillions of dollars to artificially create wealth effects in the stock market."