Antitrust Law Daily Wrap Up, TOP STORY—S.D. N.Y: $2B settlement in forex market price manipulation class action gets preliminary approval, (Dec 15, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in New York City has granted preliminary approval to the proposed settlements in an antitrust suit in which investors alleged collusion among Barclays Bank, HSBC, and nine other major banks to manipulate prices on the foreign exchange (FX) market (In re Foreign Exchange Benchmark Rates Antitrust Litigation, December 15, 2015, Schofield, L.).

According to a complaint filed 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.

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. They 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. 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.

Barclays, HSBC, Bank of America, BNP Paribas, Citigroup, Goldman Sachs, JPMorgan, RBS, and UBS have entered into proposed settlements providing for a combined settlement of $2 billion. In October 2015, the plaintiffs moved for preliminary approval of the settlements with the nine banks, leaving seven non-settling defendants to continue the litigation.

Certification of settlement classes. For purposes of the settlements, the following two classes were certified: (1) all persons who, between January 1, 2003 and the date of the preliminary approval order, entered into an FX instrument directly with a defendant and (2) all persons who, between January 1, 2003 and the date of the preliminary approval order, entered into an FX instrument on a U.S. exchange.

Approval of settlement agreements. The court found that the settlement agreements were the result of arm’s-length negotiations between highly experienced counsel and fall within the range of possible approval. The settlements raised no obvious reasons to doubt their fairness and provided a reasonable basis for presuming the requirements of Federal Rule of Civil Procedure 23 were satisfied. Class counsel and the settlement administrator were also designated.

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

Attorneys: Christopher M. Burke (Scott and Scott, LLP), Noah Smith-Drelich (Korein Tillery, LLC), and William P. Butterfield (Hausfeld LLP) for Haverhill Retirement System. Andrew J. Entwistle (Entwistle & Cappucci LLP) for Value Recovery Fund LLC and Augustus International Master Fund, LP. David Harold Braff (Sullivan and Cromwell, LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling, LLP) for Citigroup, Inc. and Citigroup, NA.

Companies: Haverhill Retirement System; Value Recovery Fund LLC; Augustus International Master Fund, LP; Barclays Bank PLC; Citigroup, Inc.; Citigroup, NA

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