Banks Fail to Have Manipulation Hearing Thrown Out

A class action brought against 16 banks and their affiliates for alleged manipulation of FX markets will be allowed to go ahead after a New York judge largely ruled in the plaintiffs’ favour by throwing out a motion to dismiss brought by the defendants. The banks did, however, have the appeal to have the motion dismissed granted in part. The ruling has no bearing on the outcome of the case, it is merely a technical legal step to allow it to advance.

It is separate from the previous case brought against a group of banks in the Southern District Court of New York in that these plaintiffs opted out from that case to bring more specific claims, including that the manipulation had been ongoing since 2003. The banks had argued that because the data indicated no manipulation against the plantiffs’ favour on more than half of the days under consideration, however Judge Lorna Scholfield rules that the original complaint made no mention of manipulation every day, writing, “rather, they allege that the analyses are based on “conservative assumptions” and publicly available pricing data such that “[i]t is likely Defendants’ conspiracy was active with even greater consistency, just that its effects may not stand out enough from the noise in the data to be seen through Plaintiffs’ preliminary, highly conservative model.”

The plaintiffs had alleged all FX transactions were affected by the alleged manipulation, however Judge Schofield rules that claims against non-defendants are dismissed because they could not have been part of a conspiracy as they were not in contact with the defendants. The claim by the plaintiffs that pricing of their transactions against a bank’s pricing engine was manipulated because that engine used data from public platforms that was itself influenced by their alleged manipulative trades, was also thrown out, however it can continue on the basis of transactions executed by RFQ and RFS where the trade was executed in a similar fashion to a voice trade. The defendants’ attempts to have exchange-based trades ruled out was also dismissed, as was an attempt to have pre-2007 trades removed from the class action because they believed the plaintiffs had been alerted to the problem by a press article.

Claims against Barclays, JP Morgan and Royal Bank of Canada were dismissed with regard to the benchmark allegations, however spread manipulation claims will go forward, while all claims against SG Americas were dismissed and the bank removed from the case, as was MUFG. All other claims against entities of Bank of America, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Natwest Markets, Royal Bank of Canada, Standard Chartered and UBS, will go ahead to a further court hearing.

Colin Lambert

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