The CHF27bn (€22.5bn) pension fund for the Swiss canton of Zurich (BVK) has assured its members it is “protected against possible price manipulations” as five major global banks are fined for alleged foreign currency market manipulation.
For more than two years now, Swiss, UK and US authorities have been investigating cases of alleged manipulation of foreign exchange markets, while the BVK introduced several mechanisms to prevent such distortions in its own portfolio.
In a statement, the pension fund said it was using “competition” as “penicillin to heal intransparent pricing” in foreign currency trading.
Via a multi-banking platform, each transaction for the BVK is sent to 12 different banks, giving them 120 seconds to respond with a price for the requested service – hedging the US dollar against the Swiss franc, for example.
The banks’ competitiveness is checked on a regular basis, and sometimes banks are replaced by others, it said.
Further, the BVK said it was trading during the more liquid market hours between 10am and 12am rather than at the often used 4pm GMT, if possible.
This means the fund does not have fixed hedging times at which market manipulations most often occur.
It also means it has accepted slight price diversions, but these are “compensated over time”.
The pension fund also stressed that it would “closely monitor further developments and current proceedings” and vowed to “enforce its own claims” should wrongdoing be detected.
The BVK was one of the Swiss Pensionskassen to reclaim commissions providers might have accepted when investing for the pension fund.