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By Jamie McGeever and Matt Scuffham
LONDON, Oct 30 (Reuters) - Fallout from globalinvestigations into possible manipulation of the $5.3trillion-a-day forex market spread on Wednesday, as Royal Bankof Scotland (RBS) said it had sought to reassure clientsabout rates they were offered while Barclays said itwas cooperating with regulators.
Benchmark foreign exchange rates, often referred to asfixes, are a cornerstone of global financial markets, used toprice trillions of dollars worth of investments and deals andrelied upon by companies, investors and central banks.
Regulators in the United States, Asia and Europe areinvestigating possible manipulation of these benchmarks and RBSconfirmed on Wednesday it had emailed clients last week to tellthem it was reviewing how it trades foreign exchange in theminutes before rates are set.
"We are currently considering processes around the benchmarkservice. The email does not reflect final policy and we areclarifying this with our clients," RBS said.
Barclays, meanwhile, said it was reviewing records from itsFX trading business going back several years as part of theinternational probe.
UBS and Deutsche also said this weekthey were cooperating with authorities.
According to a Bloomberg report, RBS had emailed customersto reassure them that RBS traders would not share details oftheir FX orders with traders at other banks and would not useknowledge of such orders to make bets for themselves.
In echoes of the global probe into the manipulation ofbenchmark interest rates, authorities are investigating whethertraders at investment banks colluded with counterparts at otherbanks to try and rig FX rates, tipping each other off abouttheir positions to try and influence the rate set.
RBS is one of a number of banks that has handed over FXtraders' electronic chats to Britain's financial regulator, asource familiar with the matter said earlier thismonth.
BIGGEST PLAYERS
Banks are cooperating with the FX probe after a years-longinvestigation into manipulation of benchmark interest rateswhich has so far led to five institutions, including RBS, beingfined around $4 billion and seven individuals criminallycharged.
As part of their interest-rate rigging settlements, banksincluding Barclays, UBS, RBS and Rabobank have agreedto turn over all information that the U.S. Justice Departmentasks of them for at least two years, enabling Washington toprobe the setting of benchmark FX rates.
Deutsche Bank, Citigroup, UBS and Barclays are thefour biggest players in the global FX market with a combinedshare of over 50 percent.
UBS, Barclays and Deutsche declined to comment on whetherthey were reviewing FX trading practices. Citigroup was notimmediately available to comment.
The key foreign exchange benchmark rates, WM/Reuters, arecompiled using data from Thomson Reuters and otherproviders, and calculated by WM, a unit of State Street.
Thomson Reuters is the parent company of Reuters News, whichis not involved in the fixing process.
The WM/Reuters rate set at 4 pm London time is considered thebenchmark by many companies and investors because more than 40percent of daily global FX trading is done in London. It is thenearest thing to a closing price in a 24-hour, self-regulatedmarket.
To calculate the benchmark, WM takes the median of actualtrades and order rates during a one minute "fix" period. Therates are set hourly, or every 30 minutes for active currencies,and cover some 160 currencies.
Regulators are investigating whether traders used advanceknowledge of customer orders to make money for their banks' ownaccounts, an illegal practice known as "front-running", and pushed through trades around the 1 minute window when thebenchmarks are set to try and influence them.
While RBS sought to reassure clients that it would not besharing information about flows related to the fix, it said itwould hedge its own position up to 15 minutes before thebenchmark is set to protect itself against market movements.
