Antitrust Law Daily Wrap Up, TOP STORY: JPMorgan settles forex market price manipulation claims, (Jan 5, 2015)

By Jody Coultas, J.D.

JPMorgan Chase & Co. has reached a settlement in an antitrust lawsuit in which investors alleged JPMorgan and 11 other major banks colluded to manipulate prices on the foreign exchange market, according to a letter submitted today to the federal district court in New York City. It is anticipated that the Class Lead Counsel will move for preliminary approval of the settlement at the end of the month. Settlement terms were not disclosed (In re Foreign Exchange Benchmark Rate Antitrust Litigation, January 5, 2015, Schofield, L.).

According to a complaint filed against the banks in 2013, traders at the banks colluded to manipulate the global standard WM/Reuters Rates for determining exchange rates for different currencies, resulting in profit for the banks at the expense of their clients. The WM/Reuters Rates serve as a benchmark settlement price for trading in 158 currencies, and are employed extensively in the operation of financial markets for uses such as valuing portfolios and funds that track global indexes and as a benchmark for currencies in contracts.

Traders at the banks allegedly traded ahead of large client orders that were believed to move the market, thus permitting the banks to profit or avoid losses. The traders allegedly would manipulate the rates by pushing through a high number of low-volume trades in the one-minute period before the WM/Reuters Rates were calculated, a process known as “banging the close.” These trades could artificially increase or decrease an exchange rate by hundredths of a percent, and could result in an approximately 100 basis point deviation from the day’s exchange rate.

The investors cited e-mails and instant messages sent by traders at the banks in which they strategized about rate manipulation and obtained information about impending trades. The traders allegedly referred to themselves in chat rooms by various names, including “The Bandits’ Club,” “The Cartel,” “The Club,” and “The Dream Team.” The complaint noted that the banks suspended or dismissed traders in their foreign exchange divisions.

The 12 banks named in the lawsuit allegedly held an 84 percent global market share in currency trading, and were counterparties in 98 percent of U.S. spot volume.

Various authorities have opened investigations into possible manipulation of the $5.3 trillion-a-day foreign exchange market, including the Department of Justice, the Commodity Futures Trading Commission, the United Kingdom’s Financial Conduct Authority, the Swiss Financial Market Supervisory Authority, the Hong Kong Monetary Authority, the Singapore Monetary Authority, and European Union antitrust regulators. JPMorgan and five other banks previously reached a $4.3 billion settlement with U.S. and European regulators.

The proposed settlement agreement requires the approval of the federal district court in New York City.

The case is No. 1:13-CV-07789-LGS.

Attorneys: Christopher M. Burke (Scott & Scott) and Michael D. Hausfeld (Hausfeld LLP) for Class Plaintiffs and the Class. Peter E. Greene (Skadden, Arps, Slate, Meagher & Flom LLP) for JPMorgan Chase & Co. and JPMorgan Chase Bank N.A.

Companies: Haverhill Retirement System; Barclays Bank PLC; Citigroup, Inc.; Citibank, N.A.; Credit Suisse Group AG; Deutsche Bank AG; JPMorgan Chase & Co.; Royal Bank of Scotland Group, PLC; UBS AG

MainStory: TopStory Antitrust