Fiddling whilst the Swissie churns

So what do they know? They spend their lives dealing, trading, monitoring and watching. Yet last week, when the Swiss Central Bank detached the Swissie (the Swiss Franc) from tracking the Euro, in the immortal words of my namesake, they knew nothing.

This despite the fact that one of the most widely followed financial operatives, the Singaporean trader Jim Rogers, had talked openly of the unease of the Swiss banks about continuing to track the Euro now that the European Central Bank is openly considering a spate of quantitative easing.

So caught on the hop were some of the Foreign Exchange dealers not clear what the evidence is for that statement? More accurate to say – that many lost significant sums of money. Citi Bank lost $150m, less than $1oom and the sponsors of West Ham football Club, Alpari UK, said last week it had entered insolvency but is now considering all options including a sale.

Strangely the ‘masters of the universe’ then appear to have sat on their hands in shock. Several dealers have told me that they did not immediately understand the inevitable impact on stocks – particularly those in which the Swissie was in play. The plunge in the FT 100 Index was slow. Only later in the day did many dealers get round to selling exposed assets.

It all recalls the ignorance and incompetence, underlying the corruption and theft that swirled around the global foreign exchange scandal for which banks and finance house are still settling their fines. Despite a number of arrests no one has yet gone to jail for fiddling the foreign exchange market.

For all the City whining about tightened controls, tougher regulation, and better behaviour on the dealing floors, the ignorance exposed by the handling of the ‘decoupled’ Swissie reveals that very little has changed since the most public display of financial irresponsibility and incompetence in 2008.

We keep being told that a lot has been fixed since the Banking Crisis. Equally we are told it could happen again. The world clearly needs a foreign exchange system that is fool proof and fiddle proof.

International trade depends on a reliable FX system. Do we have it? Who knows. But I suspect not. Then again. In this regard, I know nothing.

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