Forex Trading

Hefty fines on banking giants over forex cartel

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Five banking giants were fined a combined total of 344 million euros for participating in an illegal foreign exchange (forex) trading cartel, EU antitrust regulators said on Thursday (Dec. 2).

A total fine of 261 million euros was levied on UBS, Barclays, RBS and HSBC with an extra 83 million euros to Credit Suisse for exchanging sensitive information and trading plans, and occasionally coordinating their G10 currency trading strategies, through an online professional chatroom known as “Sterling Lads”.

G10 currencies, which in fact include 11 currencies, namely the Euro, British Pound, Japanese Yen, Swiss Franc, US, Canadian, New Zealand and Australian Dollars, and Danish, Swedish and Norwegian Crowns, are the most liquid and traded currencies worldwide.

“These information exchanges enabled the traders to make informed market decisions on whether and when to sell or buy the currencies they had in their portfolios, as opposed to a situation where traders acting independently from each other take an inherent risk in taking these decisions” the European Commission said in a statement.

“Occasionally, these information exchanges also allowed the traders to identify opportunities for coordination, for example through a practice called “standing down”, whereby some of them would temporarily refrain from trading to avoid interfering with another trader” the EU’s executive arm added.

UBS, Barclays, RBS and HSBC — were discounted by 10% as they acknowledged their participation in the cartel and their liability for it.

Credit Suisse did not cooperate under the leniency or settlement procedures and  it did not benefit from any reductions granted within those frameworks.  Its fine was reduced by 4% to reflect that the Swiss bank was not liable for all aspects of the case, however.

forex trading fines
(Source: European Commission)

“The collusive behavior of the five banks undermined the integrity of the financial sector at the expense of the European economy and consumers” Commissioner Margrethe Vestager, in charge of competition policy said.

When companies exchange large amounts of different currencies, they usually do so through a Forex trader. The main customers of Forex traders include asset managers, pension funds, hedge funds, major companies and other banks.

EU antitrust authorities have already sanctioned UBS, Barclays, RBS,  over similar conduct in 2019 in a settlement featuring chatrooms called “Three Way Banana Split”, “Only Marge”,”Essex Express” and “Semi Grumpy Old Men”.

And European and U.S. regulators have slapped hefty fines on some of the world’s biggest banks since allegations first surfaced around 2013 that dealers were rigging the world’s largest financial market. Dozens of traders were suspended or fired, according to Reuters.

Thursday’s settlement decision marks the 37th decision since the introduction of the settlement procedure for cartels in June 2008. In a settlement, companies acknowledge their participation in a cartel and their liability for it.

Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. Any person or company affected by anti-competitive behavior as described in this case may bring the matter before the courts of the Member States and seek damages, the Commission said as the Brussels-based institution has come down hard on anti-competition activity.