A top HSBC executive has been charged with fraud in the US.

Mark Johnson, the company’s global head of foreign exchange trading was arrested on Tuesday night and is due to appear in court later. A former colleague, Stuart Scott, has also been charged.

The two traders are accused by the US government of using inside information to profit from a $3.5bn (£2.6bn) currency deal.

HSBC has so far declined to comment.

The US Department of Justice (DoJ) accuses the traders of “front-running”.

That is misusing confidential information provided by a client who planned to convert $3.5bn into British pounds.

It is claimed that the two executives bought sterling themselves before handling the order, because they knew that such a large transaction would push up the value of the currency, and allow them to make money.

They also timed the purchase in order to maximise its effect on the value of the British currency. As a result it's alleged they were able to generate significant profits for the bank. They are also accused of concealing their actions from the client.

“The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves,” said the US Attorney Robert Capers.

US prosecutors cited emails and conversations from Bloomberg chats that indicated the two men plotted to see how high they could raise the the dollar to pound exchange rate before the clients would ‘squeal’.

The DoJ said that HSBC brought in roughly $8m profit from the currency trades they conducted for client.

About 40% of the world’s currency dealing is estimated to go through trading rooms in London.

The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets.

There is no physical forex marketplace and nearly all trading takes place on electronic systems operated by the big banks and other providers.

Daily “spot benchmarks” known as “fixes” are used by a wide range of financial and non-financial firms to, for example help value assets or manage currency risk. (BBC)

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