Tuesday, January 18

28 banks now targeted for rand manipulation case


This week, the Competition Commission asked the Competition Court to expand to 28 the number of defendant banks that allegedly manipulated the rand through private Bloomberg messaging rooms since September 2007.

Previously, 19 banks were alleged to have participated in a conspiracy to manipulate the rand.

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This week, the commission asked the court to add nine more banks to the list of suspected conspirators, accused of directly or indirectly fixing the price of the US dollar rand by manipulating bids, offers, the bid-offer spread, and the cash exchange. index.

“The conspiracy participants sought to profit through their participation in the conspiracy by receiving assistance from competing traders to make profits, reduce risk and avoid losses, when they engaged in currency trading with the USD / ZAR currency pair.” says the commission. court papers.

Allegations

Merchants of participating banks are alleged to have been in frequent and regular contact and communication with merchants of other banks via Bloomberg chat rooms to coordinate their business activities, provide information to each other, and reach an understanding on strategies. commercial.

Read:

Rand manipulation investigator alleges widespread currency collusion [2015]
The dark and ‘smoky’ chat room that could sink rogue forex traders [2018]
Currency manipulation case against 20 banks suffered a setback [2019]
CompCom wants authority over non-South African banks [2020]

The commission’s complaint to the court says it does not know whether the “widespread conspiracy” between the banks has ceased to operate.

The effect of the alleged conspiracy between 2007 and 2013 was the absence of random fluctuations and volatility in the foreign exchange market over time and between banks, the use of round figures for market quotes and a constant spread of between R0 .05 and R0.1 charged by South African banks for the purchase of US dollars, with the exception of RMB.

The commission’s complaint accuses individual bank merchants of participating in a conspiracy.

Banks fight back

The banks’ legal teams analyzed the commission’s case, arguing that it lacked jurisdiction and had not presented a strong enough case to proceed.

Mike van der Nest, representing JP Morgan, argued this week that the commission’s case is based on 158 conversations involving 28 banks over a seven-year period, doing little to further the argument that everyone in the industry knew what others were doing.

“It is very important for the commission to launch a case against 28 respondents. The commission needs to explain the glue and the facts that make up the glue, ”he said.

Chris Loxton, ANZ’s legal representative, argued that the case against ANZ was “so remote and weak, we are surprised that we are still in this process.”

“The commission has not identified those banks against which there is a strong and winnable case,” he said.

He cited the vagueness of the claims against ANZ merchants Jason Katz and Murat Tezel.

Loxton admitted that Katz was an enthusiastic participant in these chat rooms, but that there was no participation in these chat rooms allegedly after 2012, which was before Katz joined ANZ as an employee.

The commission’s complaint against the merchants was problematic due to the lack of details about the chat room that was allegedly used and the day the alleged conspiracy was supposed to have occurred. The commission claims that a conversation from one chat room was copied and pasted into another, yet there was not a single incident of this nature after 2012 involving Katz or Tezel.

“How is it that the commission concludes that the two individuals were accomplices and that, therefore, ANZ was complicit?” Loxton asked. “The way they do it is by claiming conclusions and not claiming facts.”

‘Unknown individuals’ also involved

The commission also alleges that there were other unknown persons involved in the conspiracy, whose vagueness undermines an earlier ruling by the Competition Appeal Court for greater particularity on the part of the commission’s complaint.

In 2018, many banks surveyed filed exceptions or objections to the commission’s case. It was also argued that the court lacked jurisdiction over some of the defendants and that the commission had not alleged sufficient facts to support a cause of action. Many banks argued that the joining of the additional parties should not be successful.

In 2018, the majority of the parties requested the dismissal of the case against them in its entirety.

Court order

In 2019, the court ordered the commission to provide more details in its complaint and to limit itself to its claims of a single general conspiracy.

The commission was also required to limit the relief requested against reporting banks without a presence in South Africa to a so-called declaratory order.

This week’s arguments

In their arguments in court this week, both ANZ’s Loxton and Arnold Subel, representative of Standard Bank of SA (SBSA), pointed to factual inaccuracies in the commission’s submission affidavit setting out its case against the banks.

Subel added that the commission’s case did not meet the minimum requirement established by the 2019 Competition Appeals Court ruling, as it lacked particularity, nor did it come close to establishing a violation by SBSA.

In its arguments, the commission refuted claims that it had not provided sufficient facts to support its case, and that it was not required to allege the consequence or effect of each case of conduct among the merchants involved, as argued by the banks.

The full effects of the alleged conspiracy will be fully aired at trial, where the commission will argue that the prohibited conduct should be viewed as a whole, rather than a series of isolated instances.

Earlier this week, Nedbank objected to its backlog of proceedings, arguing that the commission did not validly initiate a complaint against it in 2015. The commission responded that there was no merit in this argument as there is precedent that allows a party to be cited even after the initial complaint is filed.

Banks the commission requested to join the proceedings this week include HSBC USA, FirstRand, FirstRand Bank, Standard Americas, Credit Suisse USA, Merrill Lynch and Bank of America.

In most cases, the banks objected, claiming that the commission lacked jurisdiction.


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