‘Lets Double Team It,’ FX Traders Say in ‘Cartell’ ChatsJulia Verlaine and Liam Vaughan
Traders worked together to “whack” the market, called themselves a “cartell” and congratulated each other for a job well done, according to transcripts released today by regulators.
“Ok, i got a lot of euros,” a currency trader at JPMorgan Chase & Co. said in an undated 3:51 p.m. message to his counterpart at Citigroup Inc. A minute later he says, “tell you what, lets double team it.”
Dozens of chats spanning four years from 2008 and rife with misspellings were released by regulators as they reached the first settlements in the global probe into the manipulation of foreign-exchange benchmarks. Citigroup, JPMorgan, Royal Bank of Scotland Group Plc, HSBC Holdings Plc, UBS AG and Bank of America Corp. were ordered to pay about $4.3 billion. Several of the banks said in statements today that they have been working to improve controls and don’t tolerate such behavior.
Traders discussed which of their counterparts to include in chats and openly disclosed their positions with dealers at other banks just before the 4 p.m. WM/Reuters fix. That’s one of the most popular benchmarks for asset managers, and a time of day that was especially volatile for currency trading, so knowing other firms’ client orders beforehand could be advantageous.
Breaches of client confidentiality and inadequate chat-room supervision are at the heart of regulators’ findings in the foreign-exchange probe that commenced over a year ago.
In another excerpt, traders at Citigroup, JPMorgan, and UBS debate whether to invite a fourth into a private chat room. “Are we ok with keeping this as is .. ie the info lvls & risk sharing?” the UBS trader asks at 7:49 a.m.
A minute later the JPMorgan trader tries to ensure that the new member puts the interests of the group first. “You know him -- will he tell rest of desk stuff -- or god forbin his nyk...” referring to New York colleagues.
The Citigroup trader then chimes in, “yes -- that’s really imp[ortant] q[uestion] -- dont want other numpty’s in mkt to know,” according to the transcripts, which added the wording clarification.
“But not only that,” the trader added. “Is he gonna protect us like we protect each other against our own branches?”
Banks have cracked down on chat rooms over the past year, banning online discussions involving multiple parties at multiple firms. Regulators cited similar conversations in their settlements of their probes into the manipulation of the London interbank offered rate.
“Ultimately, it came down to the behavior of individual market participants,” said Marshall Bailey, president of the ACI Financial Markets Association, which represents more than 13,000 people working in financial markets including foreign exchange. “We must work with international regulators to strengthen and implement these internal controls and ensure they are applied across all institutions globally.”