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Alleged Currency Options Misconduct Believed to Involve Order Book

Further to P&L’s Squawkbox exclusive ongoing reports (see Squawkbox, November 16 and December 7) on alleged misconduct in the currency options market by an interdealer broker in New York, sources now say that the access to prices may actually involve views of the order book as well.

While it was believed that the alleged wrongdoing surrounded only access to prices – and that the practice ended at the beginning of last year – sources now tell Squawkbox that the firm on the receiving end is continuing to investigate, as there is now a concern that the practice is still ongoing – and that it may go further than just prices.

According to these sources, the alleged offending firm can see the order book as well, so they are gaining access not only to prices on another broker’s screens, but to the banks names. It is also believed that the “victim” firm has not yet notified its customers of the alleged, ongoing, security breach.

P&L’s Squawkbox contacted Richard Higgs, senior managing director and head of emerging markets at Tullett Prebon, and Nick Brown, head of FX at GFI, who both emphatically stated that their firms are not involved in this alleged misconduct in any way.

Dan Lavecchia, executive managing director and global head of FX products at BGC Partners declined to comment. Calls and emails into Tradition-Icap (TFS) requesting comment from general counsel, Chaim Levin, and Michael Leibowitz, CEO, TFS-Icap, were not returned by press time.

In the original story, rumours had been circulating that an FX options brokerage desk in New York was able to access internal prices from a rival broking firm. Sources alleged the activity occurred throughout 2008, and possibly earlier, but it was believed to have ceased around the turn of the year. They now say the practice may be ongoing.

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