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by Mike Caswell
The Ontario Securities Commission has filed a case against the Royal Bank of Canada and the Toronto-Dominion Bank for supervision failures in the foreign exchange businesses of the banks. According to the OSC, the banks allowed traders to swap confidential information with traders at other institutions. The information that the traders shared with each other included details such as trade sizes, timing and price, the OSC claims.
The case against the banks is set out in two statements of allegations that the OSC released on Monday, Aug. 26. The OSC claims that over a period of about two years, traders in the foreign exchange (or FX) departments in each bank participated in chat rooms with traders from other institutions. Ostensibly, traders were looking to gain some insight into "market colour," but in reality they were swapping confidential information, the OSC says.
The chat room misconduct, as set out by the OSC, took place from 2011 until late in 2013. The regulator has not accused TD or Royal Bank of using the chat rooms for currency manipulation, but rather of supervision failures. The banks should have identified the on-line chat rooms as a potential problem and realized that the "frequent flow" of information amongst traders increased the risk of confidential information going out.
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