Number-crunching the FX fixing fines

Behind the numbers in the FX fixing scandal, which represented a "brazen 'heads I win, tails you lose' scheme", according to New York State superintendent of financial services Benjamin Lawsky.

0   Transaction costs paid by users (e.g., customers) of the fix to ensure getting filled at a rate unknowable in advance on potentially unlimited size

0   Allegations of wrong-doing levied against some senior FX traders at banks not involved in the recent settlement, who have nevertheless been suspended from their jobs for more than a year

0   Charges of currency manipulation against sovereign authorities who, in the not-too-distant past, used to execute orders aggressively in pairs not involving their home currency, in order to move the price

0   Amount of the fine, as far as Macro Man can determine, paid by the Hildebrand family after Mrs. Hildebrand cleared CHF 75,000 on a PA trade when Mr. Hildebrand implemented the 1.20 floor in EUR/CHF

1  Price, in pennies, that some HFT donut sold Accenture at during the Flash Crash

1   Number of electronic trading entities charged with wrongdoing in relation to the Flash Crash

1   Losing days out of 1,238 that HFT firm Virtu Financial admitted to losing money in its IPO prospectus last year

5   Banks fined by US, UK, and Swiss authorities

5,700,000,000   Fine, in dollars, levied against these banks

n + 1  The equilibrium number of regulators to claim jurisdiction and levy a fine, relative to the number who have already done so

countless  The number of entities harmed by the FX fix, according to the US Attorney General.   This is possibly because the authorities have not attempted to count or quantify the actual cost to society, thus rendering the analysis literally count-less

Listen, no one is saying that everyone involved was a white knight, because they weren't.   But amongst industry practitioners, it was understood that the minute or two around the fix was Wild West territory, an understanding that existed years if not decades before the period of wrong-doing covered by the settlement.

Moreover, fixings did not systematically skew exchange rates persistently in one direction or another; rather, the impact, insofar as there was one, was simply to shift a given rate a few basis points from where it otherwise would have been for a few minutes, a shift that was usually driven by underlying fixing flow.  The medium-term, let alone long-term, impact of these activities was negligible.

It is therefore bemusing to see regulators use banks as an ATM (geddit?!?!?!) to withdraw cash for behaviour that may seem unsavoury but was at least partially required to ensure that clients were able to get filled at the fixing rate.   Meanwhile, market behaviour that seems substantially worse, and in regulated markets, continues to go unpunished.