South Africa prosecutes banks for price fixing in the trading of the rand

15 Feb 2017

South Africa’s Competition Commission has taken a firm step to prosecute 16 local and international banks who are accused of price fixing that may have manipulated the value of the Rand in the currency markets.

The Commission announced yesterday that it has referred a collusion case to the Tribunal for prosecution against the banks. The banks are: Bank of America Merrill Lynch International, BNP Paribas, JP Morgan Chase & Co, JP Morgan Chase Bank, Investec, Standard New York Securities, HSBC Bank, Standard Chartered Bank, Credit Suisse Group; Standard Bank of South Africa, Commerzbank; Australia and New Zealand Banking Group, Nomura International, Macquarie Bank, ABSA, Barclays Capital and Barclays Bank.

“The referral of this matter to the Tribunal marks a key milestone in this case as it now affords the banks an opportunity to answer for themselves,” said the Commissioner, Tembinkosi Bonakele.

The Commission is seeking an order from the Tribunal declaring that the respondents have contravene the Competition Act. Further, the Commission is seeking an order declaring the accused banks are liable for the payment of an administrative penalty equal to 10% of their annual turnover.

In its statement the Commission said it has been investigating a case of price fixing and market allocation in the trading of foreign currency pairs involving the Rand since April 2015. It has now referred the case to the Tribunal for prosecution.

 The Commission found that from at least 2007, the respondents had a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading involving US Dollar / Rand currency pair. Further, the Commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times.

Traders of the respondents primarily used trading platforms such as the Reuters currency trading platform to carry out their collusive activities. They also used Bloomberg instant messaging system (chatroom), telephone conversation and had meetings to coordinate their bilateral and multilateral collusive trading activities. They assisted each other to reach the desired prices by coordinating trading times. They reached agreements to refrain from trading, taking turns in transacting and by either pulling or holding trading activities on the Reuters currency trading platform.  They also created fictitious bids and offers, distorting demand and supply in order to achieve their profit motives.

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