Articles tagged by Manipulation
Three former Barclays traders have been
found guilty by a London court of conspiring to manipulate the London Interbank
Offered Rate (Libor) benchmark interest rate.
According to a statement from the UK
Serious Fraud Office (SFO) Monday, trader Jay Merchant, ...
The US Federal
Reserve Board has banned former Barclays and UBS FX trader, Matthew Gardiner,
from working in the banking industry for his manipulation of FX pricing
board says that from January 2008 until at least January 2013 that Gardiner “...
A senior HSBC executive has been arrested in New York in
connection to the US Justice Department’s FX rigging investigation, according
to various news outlets.
These reports are naming the person arrested as Mark
Johnson, global head of FX ...
Jason Katz, who formerly worked as an FX dealer at Standard Bank, Barclays, BNP Paribas and ANZ, has become the first individual to plead guilty to participating in a price-fixing conspiracy in the FX market, the US Department of Justice (DoJ) announced today.
According to the relevant court documents, Katz was a dealer of Central and Eastern European, Middle Eastern and African (CEEMEA) currencies on the New York FX desks of three successive financial institutions, and from approximately January 2007 until July 2013, he conspired with FX dealers at competing institutions to “suppress and eliminate competition” by fixing prices in CEEMEA currencies, in violation of US law, according to the DoJ.
Deutsche Bank and JP Morgan have filed court documents seeking to settle a class action claim brought against them and other market participants over alleged Yen interest rate benchmark manipulation.
The documents were filed Friday in the US District Court of Southern New York and while the two banks do not admit liability or wrongdoing, Deutsche has agreed to pay $77 million and JP Morgan $71 million. These settlements are more than double those agreed by HSBC and Citi last year.
The UK’s Financial Conduct Authority has fined Guillaume Adolph £180,000 and banned him from performing any function in relation to any regulated financial activity. Adolph formerly worked at Deutsche Bank as a short-term interest rate derivatives trader, trading products referenced to CHF and JPY Libor and for a period of time, acted as the primary JPY Libor submitter for Deutsche. Adolph was initially charged by the FCA in January 2014, however proceedings were stayed due to the ongoing criminal investigation of the UK’s Serious Fraud Office into certain individuals who formerly worked at the bank.
Mark Johnson, the former head of global FX cash trading at HSBC in London, has been sentenced to two years in prison following his conviction for eight counts of wire fraud and one conspiracy charge by a US court in October last year. Johnson was also fined $300,000.
Profit & Loss has reported extensively on the case, and just pulling out a few of the headlines provides a fairly decent timeline for how the case has developed since Johnson was arrested in New York almost two years ago.
Citi has paid $100 million after reaching a settlement with 42 US states’ Attorneys General over allegations it manipulated the benchmark interest rate USD Libor.
The Attorneys General alleged that Citi misrepresented the integrity of the Libor benchmark to state and local governmental, not-for-profit, private, and institutional trading counterparties by concealing, misrepresenting, and failing to disclose that it, at times, made USD Libor submissions to avoid negative publicity and protect the reputation of the bank. This is the third fine paid by a bank relating to this investigation.
The US Commodity Futures Trading Commission has issued an Order simultaneously filing and settling charges against JP Morgan for what it says was the attempted manipulation and "muscling" of the US dollar ISDAFix 11am benchmark including the submitting of false rates. The order also requires the bank to pay a $65 million civil monetary penalty and is related to actions undertaken by certain of its traders over a five-year period, beginning in at least January 2007 and continuing through January 2012.
The New York Department of Financial Services (DFS) has fined Deutsche Bank $205 million as part of a consent order for violations of New York banking law.
As investigation by the DFS determined that from 2007 to 2013 Deutsche Bank repeatedly “engaged in improper, unsafe, and unsound conduct in its foreign exchange business due to its failures to implement effective controls”.
In addition, the DFS says that for certain time periods parts of Deutsche Bank’s electronic trading platforms had the potential to improperly disadvantage customers and improperly affect markets, when certain applications did not perform as intended.
The Australian Securities and Investments Commission (ASIC) has expressed disappointment at the failure of National Australia Bank to fully implement a reform programme linked to an Enforceable Undertaking (EU) levied by ASIC after deficiencies were found in the bank's wholesale spot FX business.
NAB, along with the other major Australian banks, were fined by ASIC in December 2016 for a series of failures in their FX businesses, including attempts at front running orders, manipulating fixes and inappropriately sharing confidential information.
Intercapital Capital Markets (Intercapital), a NEX Group subsidiary formerly known as ICAP Capital Markets (ICAP), has agreed a $50 million settlement with the US Commodity Futures Trading Commission (CFTC) in relation to allegations that some of its brokers aided and abetted attempts by several of its bank clients to manipulate the ISDAFIX benchmark.
A CFTC order issued today finds that over more than five years, beginning in at least January 2007 and continuing through December 2012, ICAP’s swaps brokers were regularly enlisted by traders at bank clients to assist in attempting to manipulate the US dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) for the benefit of their bank clients’ derivatives positions, including positions involving cash-settled options on interest rate swaps.
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.”
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.
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.
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.
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.
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.
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!