BNP Paribas SA (BNP), Bank of America Corp. and three other banks were added to a lawsuit by investors now accusing a dozen institutions of rigging prices in the $5 trillion-a-day foreign-exchange currency market.
The investors, which include hedge funds and public pension funds, claim the banks’ top currency traders used closed-network chat rooms with names such as “The Cartel,” “The Bandits’ Club” and “The Mafia” to exchange confidential client information and manipulate the rates used for determining foreign exchange prices.
Traders at some banks have shared information about their positions through instant messages, executed their own trades before client orders and sought to manipulate the benchmark WM/Reuters rates, people familiar with the matter have said. Recurring spikes in trading around the periods in which the rates are calculated suggested that dealers may have been trying to influence the benchmarks.
WM/Reuters rates are published hourly for 160 currencies and half-hourly for the 21 most-traded. They are the median of all trades in a minute-long period starting 30 seconds before the beginning of each half-hour. Rates for less-widely traded currencies are based on quotes during a two-minute window.
The data are collected and distributed by World Markets Co., a unit of Boston-based State Street Corp., and Thomson Reuters Corp.
“Defendants’ conspiracy to manipulate the WM/Reuters Closing Spot Rates impacted the pricing of trillions of dollars’ worth of FX Instruments, inflicting severe financial harm on plaintiffs and members of the class,” the investors said in a revised complaint filed yesterday in Manhattan federal court.
In addition to BNP Paribas and Bank of America, the new complaint adds as defendants Goldman Sachs Group Inc. (GS), HSBC Holdings Plc (HSBA) and Morgan Stanley. Already named in the case, filed in November, were Barclays Plc (BARC), Citigroup Inc. (C), Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), JPMorgan Chase & Co. (JPM), Royal Bank of Scotland Plc and UBS AG.
The investors are seeking unspecified damages that might be tripled under U.S. antitrust law.
Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing news and information as well as currency-trading systems.
The banks used manipulative tactics including “front running,” “banging the close,” and “painting the screen,” the investors claimed.
Front running involves traders’ making transactions in their banks’ own proprietary accounts ahead of large customer orders that might move the market.
Banging the close occurs when traders concentrate customer orders before and during the 60-second window in which the fix is set, to push rates up or down.
Painting the screen involves traders’ placing fake orders with one another to make it appear that trading is moving in one direction or another.
Sally Lyden, a spokeswoman for Paris-based BNP Paribas; Tiffany Galvin, a spokeswoman for New York-based Goldman Sachs; Robert Sherman, a spokesman for London-based HSBC; Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America; and Mark Lake, a spokesman for New York-based Morgan Stanley (MS), declined to comment.
The case is In Re Foreign Exchange Benchmark Rates Antitrust Litigation, 13-cv-07789, U.S. District Court, Southern District of New York (Manhattan).
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