Friday, July 3, 2015

Brazil investigates currency market rigging by 15 global banks


A man walks past a board showing the Real-U.S. dollar exchange rates in Rio de Janeiro March 4, 2015. REUTERS/Sergio Moraes  

Thomson ReutersA man walks past a board showing the Real-U.S. dollar exchange rates in Rio de Janeiro
By Guillermo Parra-Bernal and Walter Brandimarte
SAO PAULO (Reuters) - Brazil antitrust watchdog Cade opened on Thursday an investigation over alleged currency rigging by a group of 15 global banks, the first of its kind in one of the world's busiest foreign exchange markets.
In a statement, Cade said the banks colluded to influence benchmark currency rates in Brazil by aligning positions and pushing transactions in a way that deterred competitors from the market between 2007 and 2013, at least. Traders who described themselves as "The Cartel" or "The Mafia" used online chat rooms to fix their positions ahead of market trades.
The Brazilian investigation comes weeks after six of the world's largest financial institutions agreed to pay $5.8 billion to the U.S. government to settle charges of currency rigging. The U.S. probe took more than five years, and five of those banks pleaded guilty. Some of those banks are being probed by Cade.
Foreign exchange trading in Brazil is estimated at about $3 trillion a year, excluding swaps and derivative transactions.
Globally, currency trading is estimated at around $4.7 trillion a day and has been targeted in recent government probes in Europe, the United States and Japan. The probes allege that banks privilege the execution of their own currency trades at the expense of client orders, a fact exacerbated by the fact that those deals often take place away from exchanges.
The banks in the Cade probe are Bank of America Merrill Lynch , Bank of Tokyo-Mitsubishi UFJ [MTFGTY.UL], Barclays Plc , Citigroup Inc , Credit Suisse Group AG , Deutsche Bank AG , HSBC Holdings Plc , JPMorgan Chase & Co , Morgan Stanley & Co , Nomura Holdings Inc , Royal Bank of Canada , Royal Bank of Scotland Group , Standard Bank Group Ltd , Standard Chartered Plc and UBS AG .
THIRTY PEOPLE
UBS and Standard Chartered declined to comment. JPMorgan, Standard Bank, Barclays, Credit Suisse, Citigroup, Tokyo-Mitsubishi and HSBC did not have an immediate comment. Efforts to reach the other lenders were not immediately successful.
The media office from Cade said that the ongoing probe derived from similar probes in the United States, the United Kingdom and Switzerland, highlighting the growing importance of international cooperation in efforts to root out different forms of market rigging.
Brasilia-based Cade is also investigating 30 individuals that might have participated in actions aimed at manipulating the price of U.S. dollars and other currencies in Brazil.
"The alleged conducts might have put in danger free competition in this market and hampered terms and prices for clients in their exchange rate transactions, in order to boost profits for the firms involved and distort benchmark indexes," the statement added.
In a separate document posted on its Web site, Cade said traders probably front-ran client orders and pushed through trades that affected the way benchmarks like Brazil's PTax and WM/Reuters rates were set. They might have also colluded to fix spreads on client trades, unveil spot and future trades that should have been kept confidential and even deal flow volume data, the document added.
Benchmarks like the PTax or the WM/Reuters are used by investment firms to value their assets on a day-to-day basis.
The trades were shared and discussed in online chats through Bloomberg terminals, Cade said. Bloomberg LP and Thomson Reuters, the parent company of Reuters News, compete in the financial information market, providing analytical and communication tools for investment professionals.
Both Bloomberg and Thomson Reuters declined to comment on the Cade investigation.
The real gained 1.2 percent to 3.1103 reais to the dollar on Thursday.
(Additional reporting by Leonardo Goy in Brasilia, and Luciana Bruno, Cesar Bianconi and Alberto Alerigi Jr in São Paulo; Editing by W Simon)
Read the original article on Reuters. Copyright 2015. Follow Reuters on Twitter.

No comments: