Antitrust Law Daily JPMorgan, Citigroup, others fined almost €1.07B for Forex rigging
Thursday, May 16, 2019

JPMorgan, Citigroup, others fined almost €1.07B for Forex rigging

By Jody Coultas, J.D.

EC says banks took part in two cartels in the Spot Foreign Exchange market for 11 currencies. UBS not fined as it received immunity for revealing existence of cartels.

The European Commission (EC) announced on May 16 that in two separate settlement decisions it has fined Barclays, The Royal Bank of Scotland, Citigroup, JP Morgan, and MUFG Bank (formerly Bank of Tokyo-Mitsubishi) almost €1.07 billion (approximately U.S. $1.2 billion) for exchanging sensitive and coordinating their activities in the Spot Foreign Exchange market for 11 currencies. Those currencies are Euros, British Pounds, Japanese Yen, Swiss Francs, U.S., Canadian, New Zealand, and Australian Dollars, and Danish, Swedish, and Norwegian Crowns. UBS is an addressee of both decisions, but was not fined as it revealed the existence of the cartels to the EC.

When companies exchange large amounts of a certain currency against another, they usually do so through a foreign exchange or Forex trader, the EC explained. Forex spot order transactions are meant to be executed on the same day at the prevailing exchange rate.

The EC found that some individual traders in charge of Forex spot trading exchanged sensitive information and trading plans, and occasionally coordinated their trading strategies through various online professional chatrooms. The information exchanges enabled the traders to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when, according to the EC. The illegal cartel activity also allowed the traders to identify opportunities for coordination, for example through a practice called “standing down” (whereby some traders would temporarily refrain from trading activity to avoid interfering with another trader within the chatroom).

The EC reports that traders, who were direct competitors, logged in to multilateral chatrooms on Bloomberg terminals for the whole working day, and had extensive conversations about a variety of subjects, including recurring updates on their trading activities. The commercially sensitive information exchanged in these chatrooms related to: (1) outstanding customers' orders (i.e. the amount that a client wanted to exchange and the specific currencies involved, as well as indications on which client was involved in a transaction); (2) bid-ask spreads (i.e. prices) applicable to specific transactions; (3) their open risk positions (the currency they needed to sell or buy in order to convert their portfolios into their bank's currency), and (4) other details of current or planned trading activities.

Specifically, the EC found two separate violations concerning Forex spot trading. The so-called “Three Way Banana Split infringement” encompassed communications in three different, consecutive chatrooms (“Three way banana split / Two and a half men / Only Marge”) among traders from UBS, Barclays, RBS, Citigroup and JPMorgan between 2007 and 2013. The “Essex Express infringement” included communications in two chatrooms (“Essex Express ‘n the Jimmy” and “Semi Grumpy Old men”) among traders from UBS, Barclays, RBS and Bank of Tokyo-Mitsubishi (now MUFG Bank) between 2009 and 2012.

UBS received full immunity for revealing the existence of the cartels, thereby avoiding an aggregate fine of €285 million. On the other hand, Citigroup received the largest fine, coming in at more than €310 million.

Four of the banks received reductions of their fines for their cooperation with the EC investigation. MUFG Bank did not apply for leniency. In addition, the EC applied a reduction of 10 percent to the fines imposed on the companies in view of their acknowledgment of participation in the cartels and of their liability in this respect.

Company responses. Some of the banks issued statements acknowledging the settlements. In a statement, the Royal Bank of Scotland said that its subsidiary NatWest Markets Plc was “cooperating with investigations and responding to inquiries from other governmental and regulatory (including competition) authorities on similar issues relating to past failings in FX trading.”

MUFG Bank stated that it “takes this issue very seriously” and has “cooperated fully.” “MUFG is committed to conducting business with the highest levels of integrity, and to continually enhancing its regulatory compliance,” the company added.

Companies: Barclays; The Royal Bank of Scotland Group plc; Citigroup; JPMorgan Chase Bank; MUFG Bank; UBS

MainStory: TopStory Antitrust

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