7 Banks Sued Over FX Rates Manipulation; HSBC Latest to Announce Cooperation with Authorities

A class action lawsuit for alleged manipulation of foreign exchange rates was filed on Friday, November 1st, in a U.S Federal District Court in Manhattan, New York against Barclays, Citigroup, Credit Suisse, Deutsche Bank, JPMorgan Chase, Royal Bank of Scotland and UBS.

The complainant, Haverhill Retirement System, a contributory retirement fund for public sector employees in Massachusetts, which according to a report by Bloomberg, alleges that a conspiracy involving the seven major banks to manipulate the WM/Reuters FX rates has diminished the retirement system's returns on FX trades, and also on pension plans and savings accounts that follow global indices.

The particulars of the lawsuit detail that the plaintiff intends to represent all others affected by the manipulation, and additionally alleges that these particular banks violated Section 1 of the U.S. Sherman Antitrust Act which includes a ruling that deems any form of commercial conspiracy to prohibit trade to be illegal.

As Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates continues to report, an international investigation is underway, spearheaded by the Swiss financial watchdog FINMA, which has announced that it is looking into allegations of FX manipulations by multiple financial market participants.

More recently, regulators such as the UK’s Financial Conduct Authority and law enforcement agencies with the authority to carry out criminal prosecutions, as is the case with the Federal Bureau of Investigation in the United States, have started their own investigations into the matter.

The investigation seems to have been initially focused on a chat group, where dealers sent instant messages over their Bloomberg terminals for a period of three years, allegedly using the chat group to execute their own trades before client orders and sought to manipulate the benchmark WM/Reuters FX rates.

A similar investigation, albeit on a smaller scale, was carried out by the Monetary Authority of Singapore as a result of a year-long surveillance exercise which rooted out 133 traders manipulating benchmarks, mainly relating to FX. Subsequently, the various institutions employing the traders took disciplinary action in order to demonstrate willingness to cooperate with the regulator. In the case of the lawsuit against these major western banks, a degree of cooperation with the authorities is being demonstrated, but the extent of this is yet unknown.

HSBC Cooperates With FCA

In its Interim Management Statement for Q3 of 2013 released yesterday, November 4th, HSBC became the latest major bank to announce it is cooperating with the international FX manipulation investigation.

The bank acknowledged that the Financial Conduct Authority is conducting investigations alongside several other agencies in various countries into a number of firms, including HSBC, relating to trading on the FX market. The management statement added: "We are cooperating with the investigations which are at an early stage."