Barclays fined $100 million in “last look” case


18 November, AtoZForex.com, Lagos – Barclays is one of the hardest hit banks, by the probe into alleged manipulation into the $ 5.3 trillion currency markets. UK’s second largest bank is now expected to pay at least $100 million for a separate settlement to New York’s banking regulator. This case involves the “last look” practice on its electronic currency-trading program, according to a person with knowledge on the matter.

The bank has already paid a total of $2.4 billion to a variety of regulators, including New York’s Department of Financial Services, in settlement for its involvement in the manipulation scheme, after pleading guilty in May. At the time, $485 million was paid to the DFS, but the regulator clarified that its own investigation would continue. The $100 million is in settlement of the “last look” issue.

Probe into “last look”

The probe into last look by the New York regulators commenced about a year ago. The focus was on electronic-trading platforms of the biggest banks operating on foreign currency markets. The aim is to ascertain whether some of these banks abused the practice of “last looks,” which allow the firms to back out of currency trades that shift against them.

This system is a stereotype of earlier systems where the time lag between order transfers between banks used to take time, therefore exposing the bank to price fluctuations. The Last look, on the other hand, maybe used on fairly to fill client orders at different prices to the banks advantage or cause requites of client orders.

Compensation provision

Even before Barclays fined, it had appropriated 290 million pounds ($442 million) in the third quarter financials to compensate customers who were overcharged for currency trades. At the time, Barclays Finance Director Tushar Morzaria declined to elaborate on the charge, calling it a “historical item” that occurred between 2005 and 2012.

According to Moody’s Investors Service, other current “high risk” issues which may result in substantial settlements for the bank includes:

  • costs from a probe by various regulators around the world into its 2008 capital raising from Qatari investors,
  • allegations of misconduct over the operation of its dark pool trading venue

The unfolding of these will be closely watched, as the magnitude of settlements from these probes are bound to be humongous if found guilty. Costs tied to misconducts like its involvement in the alleged currency-rigging and benchmark manipulation, are seen posing a “medium risk,” Moody’s said.

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