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Early this week the U.K.’s Financial Conduct Authority (FCA) has joined other major regulators such as Switzerland’s Financial Market Supervisory Authority (FINMA) and the Hong Kong Financial Authority in looking for possible forex market manipulations.

Say what?!

What are they looking for?

The investigations center around major market players, including banks such as the Deutsche Bank, UBS, JP Morgan Chase, Barclays, and Citigroup.

Word around the hood is that senior traders would use electronic group chatrooms with names like “The Bandits’ Club” and “The Cartel” to talk about their positions. More specifically, they allegedly try to manipulate the closing WM/Reuters rates.

WM/Reuters rates are published hourly for 160 currencies and half-hourly for the 21 most-traded ones, with closing rates “fixed” at 4 pm in London. What makes this important is that many financial firms provide services to their customers where they guarantee to trade at the published WM/Reuters rates.

Equity and bond index providers such as FTSE Group and MSCI Inc. as well as major investors and corporations also look at these rates to compute their daily portfolios and holdings.

What’s been done already?

With LIBOR-rigging investigations still fresh on the investors’ minds, it’s certainly a good move for the FCA to join the forex rates manipulation probe. After all, more than 40% of forex trading takes place in the U.K.

The FCA isn’t alone though. Switzerland’s FINMA is also on it, while the European Union antitrust regulators have said early this month that they’re launching forex market investigations. Heck, even the U.S. Justice Department has also opened a criminal investigation.

So far banks like the Royal Bank of Scotland (RBS) have handed in their instant messaging records in compliance with the FCA’s probe. Four financial firms, including Switzerland’s largest bank UBS, have been also fined about $2.7 billion, and seven men have been charged as a result of the probes.

An anonymous U.S. Justice Department source also said that two men from an unnamed Swiss bank have been fired in connection with the allegations.

How will this affect the forex market and retail traders like you and me?

While retail traders don’t usually look at WM/Reuters rates, the increased scrutiny would make traders more confident to invest in the currency markets.

Not only that but the fines and charges could lessen incentives to manipulate forex rates, which would make for a more effective currency market.

On the other hand, if the major regulators impose too many compliance rules, it could mean less variety of services available from your major brokers, more expensive costs, and possibly wider spreads.