The Herald (Zimbabwe)

StanChart settles forex rigging case

- Moneyweb.

THE commission hopes this week’s hearing before the Competitio­n Appeal Court and the Standard Chartered Bank settlement will move the case toward a final resolution

London-based Standard Chartered Bank (SCB) reached a settlement with the Competitio­n Commission yesterday, admitting to manipulati­ng the USD/ZAR exchange rate in a case that dates back as far as 2007.

SCB has agreed to pay an administra­tive penalty of R42,7 million for its role in the so-called “rand rigging case” for a variety of offences: fixing bids, offers, bid-offer spreads, the spot exchange rate, and the exchange rate at the FIX (Financial Informatio­n eXchange, an informatio­n and price sharing system between investment banks and broker-dealers).

SCB is one of 28 local and foreign banks accused by the commission of rigging the USD/ ZAR exchange rate between 2007 and 2013. The banks are accused of a “single overarchin­g conspiracy” to fix the rand exchange rate through various communicat­ion channels, such as Bloomberg and Reuters chat rooms, and allocating markets among traders.

The commission says these actions constitute price fixing and market allocation, which violates the Competitio­n Act.

The commission first brought forex rigging complaints against 19 banks in 2015 but later expanded this to 28.

The accused banks include Barclays, Barclays Africa, BNP Paribas South Africa, Investec, JP Morgan Chase, Nomura Internatio­nal, Macquarie Group, Bank of America Merrill Lynch, HSBC, and Citibank.

SCB participat­ed in dividing markets by allocating customers whereby one trader would withdraw a bid or offer, allowing the trade to be filled by another trader and manipulati­ng liquidity.

“The Commission welcomes SCB’s decision to reach a settlement on this matter and encourages other respondent banks to consider settling the complaint against them. Further, this settlement affirms the Commission’s pursuit of allegation­s related to the manipulati­on of the USD/ZAR currency pair, given the 2 ultimate impact of the currency manipulati­on on the value of the South African Rand,” said Competitio­n Commission­er Doris Tshepe in a statement.

“No evidence of a conspiracy”

Meanwhile, the Competitio­n Appeal Court (CAC) heard arguments this week from 13 banks that there was no evidence of a conspiracy, with two banks saying their traders were present in a single chat on one day. “This is not sufficient evidence that he (the trader) had knowledge of a broader conspiracy with the intention to contribute to it,” argued legal counsel for Macquarie.

The case has been running for eight years and has been mired in technical arguments, appeals and cross-appeals for much of that time. This may turn out to be the longest-running and most complex case ever filed by the commission, with the merits of the case still not argued.

It’s clear the banks have spared no expense in hiring the best legal minds in the country to argue their cases, raising a wall of objections to the commission’s case along the way. In March this year, the Competitio­n Tribunal ruled that it had jurisdicti­on to hear the case, ruling that the 28 respondent banks are accused “of engaging in conduct considered the most egregious in competitio­n law. Furthermor­e, the alleged conduct relates to fixing and manipulati­ng the rand/dollar exchange rate, which has a central and crucial role in the South African economy.”

Some foreign banks questioned whether the commission or tribunal had jurisdicti­on in the matter, as some had no presence in SA at the relevant times. Some banks also argued the commission was out of time in bringing its complaint since more than three years had elapsed since the alleged offences occurred.

The tribunal categorise­d the banks into three groups: incola (local banks), local peregrini (foreign banks with a presence in SA) and pure peregrini (foreign banks without a presence in SA). The evidence before the tribunal establishe­d adequate connecting factors to enable it to exercise “both subject-matter and personal jurisdicti­on over all peregrini respondent­s.”

Other banks to follow?

SCB’s decision to settle with the commission may prompt others to do the same. Several global banks have already admitted guilt, including two former traders with Barclays and Citigroup and former JPMorgan trader Akshay Aiyer, who was sentenced to a brief stint in prison.

The commission’s primary evidence is 158 chats involving 28 banks over seven years. This was flimsy evidence of a conspiracy, argued the banks. However, the tribunal ruled in March that a single overarchin­g conspiracy “does not necessaril­y require that all members of the conspiracy meet at the same time in the same room or for that matter that each member must have met with every other member of that conspiracy.

What it does require is contact between firms, either directly or through an intermedia­ry, and a common objective to which the participan­ts consider themselves to be bound.”

The commission hopes this week’s hearing before the CAC and the SCB settlement will move the case toward a final resolution. —

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