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Traders Join Exodus as Forex Probes Add Pressure on Costs

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The ranks of foreign-exchange
traders are rapidly thinning as a probe into alleged
manipulation of benchmark rates widens and pressure mounts on
the industry to reduce costs.

More than 30 traders from 11 firms have been fired,
suspended, taken leaves of absence or retired since October,
when regulators said they were investigating the market,
according to data compiled by Bloomberg. London-based Barclays
Plc (BARC) and Zurich-based UBS AG (UBSN) have been the worst-hit, each
suspending at least half a dozen employees, the data show.

“That’s a considerable percentage of the workforce,” said
Brad Bechtel, managing director at Faros Trading LLC in
Stamford, Connecticut, who estimated the world’s largest banks
have 80 to 160 voice traders for spot rates in the currencies
market. “That explains the lack of liquidity in the market, and
why what would normally be considered a small trade can actually
push the market around more than normal.”

Regulators around the world are investigating allegations
traders colluded to rig key foreign-exchange benchmarks used by
investors and companies by pushing through trades before and
during the 60-second windows when the WM/Reuters rates are set.
At the same time, banks are trying to fight shrinking margins by
replacing humans with computers, accelerating a longer-term
shift in trading onto electronic platforms.

About 200 traders at smaller firms focus on spot exchange
rates, Bechtel estimated in an e-mail.

‘The Mafia’

Authorities are examining whether bank traders communicated
with dealers at other firms and timed trades to influence
benchmarks and maximize profits. Some exchanged information on
instant-message groups with names such as “The Cartel,” “The
Bandits’ Club,” “One Team, One Dream” and “The Mafia.” No
firms or traders have been accused of wrongdoing by government
authorities.

Regulators from Bern, Switzerland, to Washington opened
inquiries into the $5.3 trillion-a-day market after Bloomberg
News reported in June that traders colluded to rig the
WM/Reuters rates. No firms or traders have been accused of
wrongdoing by government authorities.

Chris Ashton, global head of spot trading at Barclays, was
suspended last year along with other spot traders at the bank in
London and New York. New York-based Citigroup Inc. (C) said in
January it fired its head of European spot trading, Rohan Ramchandani.

Personal Reasons

While many personnel moves were prompted by the probes,
some people pointed to other motivations while stepping back.

Lloyds Banking Group Plc (LLOY)’s global head of spot foreign
exchange, Darren Coote, resigned from the London-based firm for
personal reasons, people with knowledge of the move said earlier
this month.

James Pearson, Royal Bank of Scotland Group Plc’s head of
trading for currencies in Europe, the Middle East and Africa, is
taking a five-month sabbatical, also for personal reasons, the
Edinburgh-based company said this week.

Deutsche Bank AG (DBK) said this week that its global head of
foreign exchange, Kevin Rodgers, will retire in June. Rodgers,
52, plans to focus on academic and musical interests, according
to the Frankfurt-based bank. His decision wasn’t prompted by the
inquiries, according to a person briefed on his plans.

To contact the reporters on this story:
Edward Evans in Davos, Switzerland at
eevans3@bloomberg.net;
Andrea Wong in New York at
awong268@bloomberg.net

To contact the editors responsible for this story:
Christine Harper at
charper@bloomberg.net;
Dave Liedtka at
dliedtka@bloomberg.net
David Scheer, Dan Reichl

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