The U.S. Securities and Exchange Commission (SEC) isinvestigating whether currency traders at the world's biggest banksdistorted prices for options and exchange-traded funds (ETFs) byrigging benchmark foreign-exchange rates, according to two peoplewith knowledge of the matter.

The SEC's inquiry adds to European and U.S. regulatory probes of possible manipulation in currencymarkets. The SEC's investigation is in the early stages, said thepeople, who asked not to be named because the matter isn't public.The Commodity Futures Trading Commission (CFTC), which regulatesforeign-exchange derivatives, is also investigating possiblemanipulation, another person said.

Authorities from London to New York have contacted at least adozen banks as they investigate allegations, first reported by Bloomberg News in June, that dealers said theyshared information about client orders to manipulate benchmark spotrates for currencies. Derivatives such as options account for morethan half of the $5.3 trillion-a-day foreign-exchange market; therest is made up of spot transactions.