FOREIGN AFFAIRS
Credit Suisse fined $135M for forex price-rigging
Credit Suisse rigged currency markets and ripped off customers for years by using secret chat room cartels and software programs designed to pick the pockets of its corporate clients, New York regulators said Monday.
As part of a multiyear probe by the state into foreign exchange trading practices at several banks, the Swiss banking giant agreed to pay a civil penalty of $135 million and to hire a consultant for one year to ensure compliance with state banking rules.
“Certain Credit Suisse executives in the bank’s foreign exchange unit deliberately fostered a corrupt culture,” Maria T. Vullo, head of the state’s banking regulator, the Department of Financial Services, said in a statement.
The probe, which broke into the open in 2015 when the DFS issued subpoenas to several banks, unearthed chat rooms where traders from several banks gathered in an attempt to rig prices, the regulator said.
In addition to Credit Suisse, Goldman Sachs and French banks BNP Paribas and Societe Generale were served subpoenas, according to a person familiar with the matter.
Credit Suisse was so brazen in its drive to rip off its own customers that it programmed its electronic trading system, called eFX, to au- tomatically front-run the bank’s own clients on as many as 72,000 orders, according to the consent order between DFS and the bank.
Front-running, or secretly trading ahead of a client’s order in order to get an advantage, can be massively profit- able — and Credit Suisse predicted that this program would generate an extra $2 million in profits in 2013, according to the DFS.
Credit Suisse’s crooked algorithm, which it used from 2010 to 2013, measured the likelihood of when a client’s trade would go through or stop because of preset limits on what the client would pay, according to the DFS.
Traders would be given information about those limits in order to trade around them, the regulator said.
“It is the name of the game if we front-run orders,” one unidentified trader wrote to the head of eFX. “Sometimes you win, sometimes you lose. It’s up to us to define the frontrun rules.”
The fine appears to be the first to hit a major bank for specifically programming market rigging into its computer systems. In addition to the algorithm, traders would conspire to fix prices in an electronic chat room, as well as give multiple orders to a single trader in order to not compete with one another, share client information with other banks, and lie about cancelling orders at the last second if they weren’t profitable, the DFS said.
The traders whose actions were fingered in the consent order no longer work for the bank.
“Credit Suisse is pleased to have reached a settlement with the DFS that allows the bank to put this matter behind it,” bank spokeswoman Nicole Sharp said in a statement.
The fine comes about two years after the Justice Department cut a $4.3 billion settlement with six banks for rigging currency markets, just one of the many Wall Street antitrust suits that have proliferated since 2012.
The state probes of the others banks continue, one source said.