HuntedRelated

Insider trading case may open Pandora's Box on forex markets

One of the biggest insider trading cases in Australian history puts the spotlight on the forex market. Ben Butler and Georgia Wilkins report.


Transparency of the forex market could change under rules being introduced by the Australian Securities and Investments Commission.

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It's the crime where no one is sure whether or not they are the victim.

Someone - most likely one of the globe-spanning banks that back the secretive retail forex market - must have been on the wrong end of a series of now notorious insider trades allegedly perpetrated by a pair of 20-something Australian university friends.

But, a week after 26-year-old NAB employee Lukas Kamay and his mate, 24-year-old Australian Bureau of Statistics worker Christopher Hill, faced court charged with offences that could see them jailed for 10 years, global financial institutions have yet to figure out which of them lost out in the multimillion-dollar trades.

Either that, or they're just not telling. Most of the alphabet soup of banks touted as liquidity providers by the two forex brokers used by Kamay, Pepperstone Financial and AxiTrader, declined to comment. However, it is believed a legal team at BNP Paribas is still investigating whether it was exposed to one of the trades.

The ambiguity around who lost out is perhaps to be expected in an industry that, despite its vast size and glossy marketing that targets retail investors, operates largely outside of the regulatory and media spotlight.

Every day, about $4.5 trillion churns through the global forex market - which, unlike the sharemarket, operates 24 hours a day. And Australia is a key part of this global circus, punching above its weight due to the strength of its economy and the high yield available to investors.

The dollar ranks fifth on the list of most traded currencies, and the Australian-US dollar is the fourth-most-traded currency pair in the world, according to the Reserve Bank.

It's a trade that has long been a trap for the unwary. In the early 1980s, farmers desperate for finance plunged into the forex market, snapping up low-interest loans denominated in Swiss francs.

But the loans, essentially a bet on the Aussie dollar remaining strong against the franc, went horribly wrong when the dollar plunged in 1985 and 1986, costing some borrowers their farms.