JPMorgan Chase & Co. and Deutsche Bank AG are cracking down on multitrader chat rooms amid investigations into currency manipulation.
JPMorgan will ban its traders from using multiparty chat rooms with peers at other firms, and is reviewing one-on-one communications, said a person familiar with the matter, who asked not to be identified because the discussions are private. Deutsche Bank will widen its prohibition on such exchanges to include its entire investment-bank unit and transaction-banking business next year, Michael Golden, a spokesman, said yesterday.
The review comes as investigators around the world scour the chat forums for evidence of wrongdoing in probes ranging from alleged manipulation of foreign-exchange markets to interest-rate rigging. UBS AG’s investment-banking arm banned its traders from using multibank chat rooms last month, and Royal Bank of Scotland Group Plc is considering such a step.
Citigroup Inc. has also banned the use of chat rooms to communicate with multiple traders at other banks, while still allowing their use to communicate on a one-to-one basis, according to a person familiar with that decision.
Patrick Burton, a spokesman at JPMorgan, Simon Boughey, a spokesman at Citigroup, and Sarah Small, a spokeswoman at RBS, declined to comment. Golden spoke following a Reuters report on the lender’s chat-room plan.
Transcripts of chat-room discussions have helped identify rigging of global benchmark interest rates. In an October visit to London, JPMorgan Chief Executive Officer Jamie Dimon told employees at the biggest U.S. bank by assets to watch what they write in e-mails and instant messages, people familiar with the matter said then.
Bloomberg News reported in November that JPMorgan was weighing a ban on multidealer chat rooms.
Deutsche Bank initially banned employees in its foreign-exchange business from using the chat rooms in February amid a global probe into the rigging of the London interbank offered rate, or Libor, before widening the restriction to the fixed-income department earlier this month, Golden said on Dec. 4.
In February, Germany’s largest bank fired five Frankfurt-based traders, who counted submitting rates among their responsibilities, for inappropriate communication with colleagues. Four of the men sued for wrongful dismissal and returned to work last month. It also fired two traders at the end of 2011 in connection with rates.
The bank said last year that its own internal investigation of alleged attempts to rig rates cleared current and former management board members of wrongdoing.
Deutsche Bank was fined 725 million euros ($998 million) by the European Union this month for rigging interest rates linked to Libor and has said it won’t have to make any “material” addition to reserves for the penalty. It increased its reserves for legal costs to 4.1 billion euros at the end of September.
Investigators undertake “enormous” efforts to look into communications between traders, Frauke Menke, an official at German regulator Bafin, told Germany’s Handelsblatt.
“Thought will have to be given to something that will make retrospective investigations easier,” Menke said in the interview published today. It’s too early in Bafin’s probe of interbank offered rates, foreign exchange and precious metals markets to say if senior executives at German banks were involved in any wrongdoing, she said.
Bloomberg News reported in June that currency dealers said they had been front-running client orders and attempting to rig foreign-exchange rates by colluding with counterparts and pushing through trades before and during the 60-second windows when the benchmarks are set. They would share details of orders with brokers and counterparts at banks through instant messages to align their strategies, two of the people said at the time.
Chat rooms make it easier for traders and salespeople on different floors or in different offices of a bank to coordinate with clients. Traders may correspond on platforms provided by Bloomberg LP, the parent of Bloomberg News, Thomson Reuters Corp. or private networks. Bloomberg reporters are prohibited from participating in client chat rooms on the company’s terminals.
Regulators and prosecutors in countries including the U.K., the U.S. and Switzerland are investigating the alleged manipulation of the foreign-exchange market. The EU is also probing the matter, which Joaquin Almunia, the bloc’s antitrust chief, compared to the Libor investigation.
More than a half-dozen finance firms have been fined about $6 billion since June 2012 for rigging benchmark interest rates such as Libor. Tom Hayes, a former UBS and Citigroup trader, and two former RP Martin Holdings Ltd. brokers pleaded not guilty in a London court yesterday in the first prosecution stemming from the investigations.