The European Union has formally fined five banks a total of EUR 1.07 billion for taking part in what the EU terms two “cartels” in the spot FX market, involving trades in 11 currencies. Two settlement decisions have been announced, the first involves a group called the “Three Way Banana Split” which sees a total […]
So we brace ourselves, as an industry, for more bad headlines about conduct in the FX markets, however in contrast to previous instances, the industry should be ready on this occasion. The culmination of the European Union’s clearly exhaustive and complicated investigation into events that first came to light six years ago is upon us […]
A jury at a London court has found former Barclays interest rate trader Carlo Palombo, guilty of manipulating the Euribor benchmark interbank lending rate, however it found a fellow former Barclays trader not guilty and is still considering its verdict in a third related case.
The UK’s Serious Fraud Office (SFO) brought the case, alleging that Palombo, Sisse Bohart, who was acquitted, and Colin Bermingham, who is awaiting a verdict, colluded with former Deutsche Bank counterparts Christian Bittar and Phillipe Moryoussef to fix the benchmark rate set. The methodology alleged by the SFO was very familiar to anyone following these cases – the dealers allegedly pressured fellow workers who were charged with submitting the bank’s reference rate, to alter to suit the accused’s books.
Bittar and Moryoussef were convicted last year on the same charges, the latter was given an eight-year jail sentence, which Bittar, who pleaded guilty, was sentenced to five years’ imprisonment.
Scepticism abounds in this week’s In the FICC of It podcast as Colin Lambert and Galen Stops take a look at the latest bank to unveil a digital markets strategy – including all your favourite buzzwords. While Stops believes this is the latest move in what will be a growing trend, our podcasters also wonder whether it’s not really just a rebranding exercise?
They then move into more traditional areas and discuss JP Morgan’s survey on FX market conditions, and while they agree with a lot of the findings, there are one or two areas that raise an eyebrow, not least around internalisation and AI.
AI-generated trading and liquidity are also the forefront as they move on to share their thoughts around the flash crash in Jardine Matheson stock last week in Singapore, including asking the question, what does it mean for market maker programmes and certain order types?
The discussion then moves on to look at the latest FX turnover surveys from the world’s FX committees, with particular attention on three interesting/puzzling (delete as appropriate) elements of the UK report surrounding RMB, NDFs and voice brokers.
The podcast ends on with Lambert praising “the optimism of youth” after Stops highlights what he thinks could be a very important line at the end of the latest document detailing an FX-related fine in the US – in other words, the cynic in him won the day!
The problems around OTC market benchmarks are well-established, but it’s not just limited to these markets – there are suspicions and claims about collusion and attempted manipulation in listed markets as well. The latest lawsuit against FX banks has a very interesting paragraph in it which highlights the Plaintiffs’ belief that the Fix is open to manipulation, which begs the question, “Why use it?”
So is it time for a rational and genuine discussion about the use of these benchmarks? I think it is.
Shortly after we published the news that Richard Usher, Rohan Ramchandani and Chris Ashton, the three members of the now notorious “Cartel” chat room, were found not guilty of FX market manipulation by a New York court last Friday, my phone started buzzing.
Lots of the activity was WhatsApp messages and phone calls from various industry sources wanting to chime in regarding the decision, and one thing that has been interesting in the intervening time is that my sources seem to be split about whether they’re surprised regarding the outcome of the case.
“I know that they only release choice bits of the chat room transcripts to the public, but what came out looked pretty damning to me. I’m surprised that they’ve been able to get out of this one,” opines one market source.
Richard Usher, Rohan Ramchandani and Chris Ashton, the three members of the now notorious “Cartel” chat room, have been found not guilty of FX market manipulation by a jury in New York.
It was alleged that between 2007 and 2013 Usher, Ramchandani and Ashton worked in coordination to fix prices and rig EUR/USD markets, participating in telephone calls and electronic messages, including near-daily conversations in a private electronic chat room, in order to achieve this. The indictment against them was issued in January of this year.
If found guilty the three could have each faced a maximum penalty of 10 years in prison and a $1 million fine.
I absolutely get the value in data – more importantly, I absolutely get the potential for data in our markets. However (and who didn’t know that was coming?) it should not become the only driver of analysis. This week’s research paper on the 4pm Benchmark Fix does a great job of empirically analysing the changes and their impact on the mechanism, but, to my mind, fails to take into account how the changes corrected an existing imbalance that needed redressing for the overall wellbeing of the market.
A new research paper that looks at trading around the WM Reuters benchmark fix between 2012 and 2017 argues that while the mechanism has been made more robust and less open to manipulation, the shift to a five minute window has made actually achieving the benchmark harder for some market participants.
The paper uses what the authors term “a unique dataset that allows us to identify the actions of individual traders” that provide new insights into how trading decisions affect the properties of the fix benchmark, and how the presence of the fix affects trading patterns.
Bank of America (BoA) has become the latest firm to settle with the Commodity Futures Trading Commission (CFTC) over the attempted manipulation of the ISDAFIX benchmark, agreeing to pay a $30 million civil monetary penalty.
The CFTC Order finds that, beginning in January 2007 and continuing through December 2012, BoA made false reports and attempted to manipulate the US dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) in order to benefit its derivatives positions, including positions involving cash-settled options on interest rate swaps and interest rate swap futures.
James McDonald, CFTC Director of Enforcement, comments: “This marks the ninth CFTC enforcement action involving manipulative conduct in connection with the USD ISDAFIX benchmark. As this case shows, the Commission will continue to work vigilantly to ensure the integrity of critical financial benchmarks and hold all wrongdoers accountable, no matter how widespread the misconduct.”