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Foreign Exchange Market and Trading Issues Research Paper


The foreign exchange market is a prudent factor while controlling the economy of a nation. It incorporates the resultant effects brought about the money entering the country as well as the profits attained by an international company and other businesses. Essentially, traders participate in regulating and disorienting the smooth control of the value of money. The stability of a country’s economic state is affected by traders in various ways. This discussion is developed to address some of the most fundamental elements that involve trader in illegal business and high prices.

Price Rigging

Traders can rig the prices when they import products without paying for taxes. Primarily, taxation allow a country to set high prices for imported goods an avoid sale of highly competitive price which may lead to disregard of the prevailing products that pass through the market. These products fetch money from the economy of a country without providing any economic benefits to the nation. This behavior allows another nation to improve due to foreign currency. In fact, manipulation of the foreign exchange program affects the sale of products globally since value of money varies between nations. The rigging happened on daily basis where it influenced the derivatives and funding through change the rate before and after the prices. A hundred and sixty currencies are valued through this platform where the final prices determined after one hour for all currencies. However, twenty-one of these currencies were published at intervals of 30 minutes. The traders indicated that if they had orders to sell a certain currency in the Swiss francs, their selling prices would be high while they would reduce the cost of buying (Trumbull 45). The integrity of the Forex as well as fine attributed to the scandal led to huge losses.

Relationships between FX and LIBOR Scandal

The two scandals are directed towards increasing the earning of the individuals corporate or people. While rigging was performed to raise higher funds for the banks, LIBOR allowed people with money to exploit borrowers at their benefit. The two aspects led to the modification of the interest rate by a significant value at the benefit of individual companies and persons. The LIBOR facilitated higher earnings for the lenders prior to the increase of rates. On the other hand, FX market traders could increase the rates while selling the currency and reduce when they wanted to buy currencies from the people. The scandals involved other financial organization to implement the interests stipulated by the plotters. The case led to the fining of both companies which attributed huge loss to prevent the reappearance of such case in the further. The banks involved at the course of both scandals faced subsequent fining and implementation of strict rules to manage the interest rates provided to the market. The employees implementing these vices were aware that they were doing illegal fixing of the Forex rates and the interests charges they were operating. After the fining, the banks involved the two scandals faced managerial reorganization to replace the distrusted people implementing these scandals. This aspect incorporated fining of people.

Punishment

The publication of such major vices for trusted financial institution has major effects on the income attained by them. Essentially, the companies lost income from the fining that was implemented prior to the court charges and government regulations. On the other hand, there were adequate losses prior to the publication of the fixing made by the companies involved. Most customers had avoided using the bank as well as withdrawn from their services due to the subject mistreatment. These attributes affected the business functionality of the institutions. These losses caused a subsequent effect to the merchant involved in the trade since their shared were also deducted. In this regard, each person felt the effects of the fixing performed in either case. However, the strategy of punishing organization affects the shareholder who did not participate in such manipulations of the rates.

The development of such policies set an example and standards for punishment and the losses associated. Furthermore, the subject company losses its reputation on the delivery of services to the customers. The customers are forced to find banking institutions that are reputable and without risk financial risks on savings and shares (Gullen 7). This aspect implies that the company may be affected hugely before attaining the position it had attained within the banking industry. Loyalty is a vital element that each business organization must secure to prevent instances of customer dissatisfaction. In a competitive market, customers have a tendency of taking business ventures with reputable and promising organizations which identify their worth in business partnership. The financial institution cannot ignore to provide satisfaction for the operations requested during venture. If such satisfaction is not issued to the customers, they many have a tendency of parting from it. When customers are lost from a business organization, the valid repercussion is the reduction in the profits. Therefore, it is imperative to protect the reputation and integrity of a financial organization to prevent such punishments.

References

Gullen, Pias. “Forex ‘Fix’ Scandal.” The Washington Post.

Trumbull, Mark. “LIBOR scandal: What is it and why you should care.” Christian Science Monitor.

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1. IvyPanda. "Foreign Exchange Market and Trading Issues." June 25, 2020. https://ivypanda.com/essays/foreign-exchange-market-and-trading-issues/.


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IvyPanda. "Foreign Exchange Market and Trading Issues." June 25, 2020. https://ivypanda.com/essays/foreign-exchange-market-and-trading-issues/.

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IvyPanda. 2020. "Foreign Exchange Market and Trading Issues." June 25, 2020. https://ivypanda.com/essays/foreign-exchange-market-and-trading-issues/.

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IvyPanda. (2020) 'Foreign Exchange Market and Trading Issues'. 25 June.

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