The European Commission (EC) has fined Barclays, The Royal Bank of Scotland (RBS), Citigroup, JP Morgan, and MUFG Bank €1.07 billion ($1.19 billion) for participating in foreign exchange spot trading cartels.
The fines involved two settlement decisions in which the five banks allegedly took part in two cartels in the spot foreign exchange market for 11 currencies.
The first decision imposes a total fine of nearly €811.2 million against Barclays, RBS, Citigroup, and JPMorgan. The second decision imposes a total fine of approximately €257.7 million on Barclays, RBS, and MUFG Bank.
UBS is an addressee of both decisions, but was not fined because the company revealed the existence of the cartels to the European Commission.
“Foreign exchange spot trading activities are one of the largest markets in the world, worth billions of euros every day,” Margrethe Vestager, European Commissioner in charge of competition policy, said in a release. “These cartel decisions send a clear message that the Commission will not tolerate collusive behavior in any sector of the financial markets.”
The EC said its investigation revealed that some individual traders in charge of forex spot trading of the currencies on behalf of the relevant banks exchanged sensitive information and trading plans, and occasionally coordinated their trading strategies through professional chat rooms.
The EC said the information exchanged in these chat rooms was commercially sensitive, and related to outstanding customers’ orders, such as the amount that a client wanted to exchange and the specific currencies involved, as well as indications on which client was involved in a transaction. The information also pertained to bid-ask spreads applicable to specific transactions, as well as the currency they needed to sell or buy in order to convert their portfolios into their bank’s currency.
“The information exchanges, following the tacit understanding reached by the participating traders, enabled them to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when,” said the EC.
The EC said that the information exchanges also allowed the traders to identify opportunities for coordination, such as through a practice called “standing down,” in which some traders would temporarily refrain from trading activity to avoid interfering with another trader in the chat room.
The EC said most of the traders participating in the chat rooms knew each other personally—for example, one chatroom was called Essex Express ‘n the Jimmy because all the traders except one named James lived in Essex and met on a train to London. Some of the traders created the chatrooms and then invited one another to join.
The traders, who were direct competitors, allegedly typically logged in to multilateral chatrooms on Bloomberg terminals for the whole working day, and had extensive conversations about a variety of subjects, including recurring updates on their trading activities.
“The behavior of these banks undermined the integrity of the sector at the expense of the European economy and consumers,” said Vestager.