Entries Tagged 'Banks' ↓

Word of the Day — Mirror Trades?

Congresswoman Maxine Waters

Recently Congresswoman Maxine Waters from California announced on the news that her committee was reviewing “mirror trades” made at Deutsche Bank

What Is Mirror Trading?

Investopedia calls mirror trading a useful strategy for investors to use in forex (foreign exchange) markets to make money from arbitraging the differences between currency exchanges located in different countries or areas of the world.

Financial institutions make this strategy available only to larger investors.

Mirror trading involves the use of computer algorithms to test trades to determine accuracy of results of the trade when made in different places (i.e. in different markets).

Of course, most people use the forex market to exchange currency at fair market rates when we travel abroad, or when doing business with foreign country entities.

The forex market is the largest market in the world with currencies worth trillions of dollars traded every day. However the major forex markets are largely dominated by banks in just a handful of countries—including the U.S.

Deutsche Bank’s Illegal Mirror Trades

Continue reading →

Word of The Day: Ramping

Ramping—what it means for financial-crime prosecutions….

 

A number of financial sector frauds are now being reported in the news.

Notable is the arrest of the HSBC executive in charge of global forex cash trading, and an outstanding warrant for a former executive at that bank.

Forex is short for foreign exchange of currencies. This is the biggest of the global financial markets. Trading in the forex market averages 5.3 trillion dollars per day!

HSBC is a British bank, one of the largest investment banks in the world, headquartered in London. Prior to the Financial Crisis of 2008, HSBC was a leader in bank transfers.

This was back in the day when bank transfers weren’t as easy to do as now. HSBC acted as an intermediary, transferring a depositor’s money from one bank or credit union into its own bank and then on to another bank or credit union.

Forex is a similar operation. An intermediary bank accomplishes a transfer of one party’s currency into a different currency that is used by another country.

Usually forex transactions are a matter of exchanging smaller countries’ currency for the big five global currencies; the US dollar, EURO, Yen, British pound, or Swiss Franc.

For business transactions, forex facilitates trade between two or more parties operating in different country currencies.

International businesses; big investors called “money-market traders”; and tourists, all depend heavily on the forex market to “get to where they’re trying to go” financially or in person.

HSBC investigated the alleged fraud, a $3.5 billion purchase of sterling in 2011 for the Cairn Energy PLC, one of Europe’s leading independent oil and gas exploration and development companies, and found no breach of HSBC’s own code of conduct.

However, after the Financial Crisis of 2008 turned over a lot of financial rocks and slimy beings scurried out into the light, HSBC was alleged to have been involved in several kinds of shady dealings. Continue reading →

Goldman’s Greek and Malaysian Deals

If you haven’t read Robert Reich’s explanation in the July issue of The Nation of how Goldman Sachs engineered Greece’s downfall you really ought to take a look. And please note this isn’t the only country in the world in which Goldman Sachs has become a persona non grata.

Reich’s allegations regarding Greece

Goldman Sachs came to the rescue, arranging a secret loan of 2.8 billion euros for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate.

As a result, about 2 percent of Greece’s debt magically disappeared from its national accounts.

The consequences were severe:

By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from 2.8 billion euros to 5.1 billion.

Continue reading →