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Can South Africa Lead a Set of New FX Fixings Investigations?

While major banks have been negotiating with regulators mainly in the G7 realm, are more fines on their way from

The South African Competition commission has become one of the first realtively minor regulatory institutions outside of G7 to turn its attention to the foreign exchange fixings scandal. The regulator announced that it will be conducting an an investigation into the practices of several international and local financial institutions in relation to their foreign exchange trading practices.

According to the announcement, the affected parties include the local subsidiaries of Barclays, BNP Paribas, Citigroup, Investec Ltd, JP Morgan Chase & Co, Standard New York Securities Inc which is a division of Standard Bank, and Standard Chartered Bank.

Regulators in emerging markets jurisdictions could aim to seek compensation from major financial institutions

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The allegations made by the watchdog are claiming that some banks have engaged in price fixing which is in violation of the Competition Act of 1998, which was amended in 2009. The South African rand exchange rate has been at the center of the investigation in this particular case.

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In recent months, as the investigations have unfolded we have been hearing about manipulation of Argentinian pesos, Russian rubles and other smaller currency pairs, which are not that actively traded on the foreign exchange market.

Should the regulators in emerging markets jurisdictions aim to seek compensation from major financial institutions, the bills of major banks could spike much higher. Local watchdogs have every reason to seek compensation from major banks, especially after those have been found guilty of fraud by the U.S. Department of Justice.

Massive investigations into the foreign exchange conduct of major financial institutions continue, as the U.S. DoJ is expected to announce a $6 billion settlement with the majority of the banks involved in FX fixings.

A statement released by the Competition Commission explained, “The alleged collusion (in rand denominated trade) was carried out through electronic messaging platforms used for currency trading, which enabled the respondents to co-ordinate their trading activities when quoting customers who buy or sell currencies.”

“Conduct of this nature distorts the price of foreign exchange and artificially inflates the cost of trading in foreign currency paired with the South African rand. The Commission will pursue cartels affecting South Africa wherever they take place,” Competition Commissioner Tembinkosi Bonakele concluded.

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