Market Manipulation

Patrick McConnell

This chapter will consider cases of manipulation across various markets, such as the Libor and FX financial benchmarks, and the manipulation of credit risk ratings in the global financial crisis (GFC). In the previous chapter, the scandals concerning mis-selling of financial products typically involved financial innovations that were migrated from corporate finance through trading and sales to retail banking. The exception was the payment protection insurance (PPI) scandal, which involved retail banking and insurance.

As discussed in Chapter 8, these scandals emerged after a period of rapid growth in volumes in a particular product or family of products during which instances of mis-selling emerged and became prevalent across the system. Pressures building up, such as through increasing customer complaints, were ignored by the business lines involved until a precipitating event, such as an adverse legal judgement, occurred. Typically, this earthquake was serious enough to shut down the product pipelines, and the firms involved were fined and/or required to provide redress to customers who had been mis-sold products.

This chapter will describe systemic operational events in