According to a recent article in the German „Handelsblatt“ US prosecutors are intensifying their investigations in the foreign exchange industry. The Department of Justice started to question salespeople at major investment banks regarding their practices. Investment banks usually don’t charge a fee for currency transactions, so their profit is the difference between the rate they give a customer and the rate they hedge the exchange at. Nevertheless, apparently investment banks such as London based Barclays, Zurich based UBS and Goldman Sachs have charged corporate clients a so called “hard mark up”. Here is how it works. Traders at these investment banks receive a phone order to buy say 10 million EUR/USD. They execute the trade immediately and then wait and see if the price moves. If the price goes up they charge the client the higher price and send an email confirmation that the trade was executed at that higher price. According to the article the markup charged is sometimes up to 30 pips. This goes of course against any ethical code of conduct but apparently that is what is happening when corporate clients who infrequently traded forex call their trusted investment banks. What conclusions can we draw from this? While it is rather unlikely that you will call an investment bank tomorrow to place a 20 million FX order you might experience the situation that your internet connection gets disrupted. This is serious because you still have an open position in the market which is not secured with a stop loss yet. Before your internet got disrupted the position went against you and you decide to close the position because you cannot follow the market without realtime prices. Please make sure that you always have the phone number of your broker`s dealing desk available. If you do not have internet access you can’t go online and google that number… While it is highly unlikely that your Forex broker will screw you with a phone order you should always ask for a two way (Bid/ Ask) price before you place a trade. You then note down the time and the price in order to verify later on if the currency pairreally traded at that specific price at this time.