European Commission fines five banks for forex manipulation
In two settlement decisions, the European Commission (the Commission) fined five banks for taking part in two cartels on the spot foreign exchange market for eleven currencies.
“Forex” refers to the trading of currencies, which is usually done by banks through Forex traders. Forex spot order transactions are Forex transactions meant to be executed on the same day at the then prevailing exchange rate.
Following a tip from one of the participating banks, the Commission’s investigation revealed that Forex traders from six banks exchanged business sensitive information and sometimes coordinated their strategies through online chatrooms. The exchanged information related to:
- outstanding customers’ orders;
- bid-ask spreads applicable to specific transactions;
- open risk positions; and
- other details of current or planned trading activities.
According to the Commission’s press release, this behavior allowed these banks to make informed Forex market decisions and occasionally to identify opportunities for coordination. The press release notes that most of the traders knew each other on a personal basis and the traders – direct competitors of each other – logged in to multilateral chatrooms on Bloomberg for the whole working day. In the LIBOR and EURIBOR cases the cartel prohibition was infringed in a similar manner.
One of the banks received full immunity for fines as it revealed the existence of the cartels to the Commission. The other five banks chose to settle the case with the Commission, thereby benefitting from a 10% reduction in fines.
In the press release the Commission emphasizes that affected parties could claim damages and that a decision of the Commission constitutes binding proof that the behavior took place and was illegal.
The Commission also notes that it will continue with other procedures concerning past conduct in the Forex spot trading market. In this respect it is worth noting that the financial sector is under close scrutiny of competition authorities. Recently, the Commission published a report on EU loan syndication and its impact on competition in credit markets (link). Competition law compliance remains essential for companies in the financial sector.
The European Commission press release can be found here.