Six big banks agreed Wednesday to pay $4.3 billion to settle civil allegations from regulators in the U.S., Great Britain and Switzerland that some of their traders attempted to manipulate the world’s $5.3-trillion-a-day foreign exchange currency-trading market to boost trading profits.
Traders from JPMorgan Chase (JPM), Citigroup (C), HSBC (HSBC), Royal Bank of Scotland (RBS), UBS (UBS) and Bank of America (BAC) shared information about the foreign exchange trading activities of their firms’ clients and colluded on strategies aimed at manipulating benchmark exchange rates for pairs of leading world currencies such as the British pound and U.S. dollar and the U.S. dollar and Japanese yen, regulators said.
The traders formed tight-knit groups to share information about client activity and used code names to identify clients, regulators said. The traders groups were nicknamed “the players,” “the 3 musketeers,” “1 team, 1 dream,” “a co-operative” and “the A-team.”
Excerpts of chat room exchanges released by investigators show the traders spoke in shorthand as they colluded to push foreign exchange rates up or down at the daily 4 p.m. London time “fix,” one of the most widely referenced benchmarks for major world currencies.
Sounding more like a mobster rather than a bank employee in one exchange, a Citibank trader issued what regulators termed a “presumably facetious” warning to a trader who sought to join one of the groups: “Mess this up and sleep with one eye open at night.”
“If the manipulation effects had succeeded, there very well could have been distortion effects on relative prices for imports and exports related to the various currencies,” said Robert Hockett, a Cornell Law School professor who specializes in monetary and financial law.