Major Banks Hit With Over $5.8 Billion in FX Probe Fines

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Top Headlines

Major Banks Hit With Over $5.8 Billion in FX Probe Fines – Profit & Loss (free story)
Six major banks have been required to pay over $5.8 billion in fines with five pleading guilty to FX market abuse, authorities announced today (20 May).

Why Barclays’ FCA Fine is Different to its Competitors – Profit & Loss (free story)
As part of the latest round of FX settlements announced by the various US and UK authorities, the latter’s Financial Conduct Authority fined Barclays £248.4 million for its part in manipulation of the Fix as well as actions around client stop losses and confidential information. One element of the FCA’s finding differed from those delivered against five other banks in November, however.

Video: Will Individuals Face Jail Over Banks’ FX Rigging? – Bloomberg
Brad Hintz, professor at New York University, and Bloomberg’s Keri Geiger discuss whether or not individuals could face criminal charges as five banks pled guilty today to rigging currency markets.

Questions Remain Following FX Settlements – Profit & Loss (free story)
As the FX industry starts to digest the latest settlements by major banks for colluding to try and manipulate the FX spot market, questions are being raised about who is responsible for the behaviour within the banks and who will ensure that it changes in the future.

The End Seems Further Away, as FX Options Enter the Fray – Profit & Loss(subscription)
You’d love to think this is the end of it, but that would be naïve. Rather than go over old ground, just a couple of observations on what we discovered last night and how they play into two long running themes.

Morning Coffee: Barclays’ Traders, Sales, Compliance Staff All Implicated –eFinancial Careers
Is Antony Jenkins going to resign? It’s a question worth asking because his predecessor did so back in 2012 when Barclays’ traders were found to have been manipulating Libor rates under his watch. Jenkins became CEO of Barclays on August 2012 and Barclays was yesterday fined a total of $2.4 billion for FX price manipulation, which the New York Federal Reserve says took place between 2008 and 2014.

ECB Dinner Speech Moves EUR Markets Ahead of Public Release – Profit & Loss (free story)
Questions have been raised about the European Central Bank’s procedures to ensure market transparency and fairness, following the uneven release of market moving information from one of its own executive board members.

Regulatory News

Five Major Banks Agree to Parent-Level Guilty Pleas – Department of Justice (press release)
Five major banks – Citicorp, JP Morgan Chase, Barclays, the Royal Bank of Scotland and UBS – have agreed to plead guilty to felony charges. Citi, JPM, Barclays and RBS have agreed to plead guilty to conspiring to manipulate the price of US dollars and euros exchanged in the FX spot market and the banks have agreed to pay criminal fines totalling more than $2.5 billion. A fifth bank, UBS, has agreed to plead guilty to manipulating Libor and other benchmark interest rates and pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.

Attorney General Lynch Delivers Remarks at a Press Conference on FX Spot Market Manipulation (press release)
Today’s historic resolutions are the latest in our ongoing efforts to investigate and prosecute financial crimes, and they serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favour; who subvert our marketplaces; and who enrich themselves at the expense of American consumers.

Assistant Attorney General Bill Baer Remarks on FX Spot Market Manipulation (press release)
Today’s guilty pleas to criminal charges represent major developments in our investigation into collusion affecting foreign exchange markets, particularly the spot market for trading US dollars and euros. The antitrust guilty pleas announced today involving four major international financial institutions – Citicorp, JP Morgan Chase, The Royal Bank of Scotland and Barclays – are without precedent.

Assistant Attorney General Leslie Caldwell Remarks on FX Spot Market Manipulation (press release)
The guilty pleas of five major financial institutions – from the US and overseas – are truly historic. The guilty plea to be entered by UBS results from the bank’s breach of its non-prosecution agreement with the department through additional criminal conduct. Due to its breach, UBS will plead guilty to felony wire fraud for its Libor-related misconduct and pay a $203 million criminal penalty.

Remarks by FBI’s Andrew McCabe on FX Spot Market Manipulations (press release)
Today’s resolution represents the results of a 19-month investigation into manipulation of the foreign exchange market. The criminality occurred on a massive scale as individual traders at the bank communicated in code in exclusive chat rooms to set price fixing on a daily basis.

Benjamin Lawsky, Sheriff of Wall Street, is Taking Off His Badge – NY Times
It has been a grim few years for the banks that Benjamin Lawsky regulates. He threatened to pull their licenses, fined them hundreds of millions of dollars and forced dozens of their employees to resign. Now, much to Wall Street’s delight, the New York State regulator will be leaving government to start his own legal and consulting firm.

Lord Hill Urges Rapid Rate-Rigging Rule Approvals – Financial News(subscription)
Lord Hill, the new EU commissioner for financial services, this week called for swift approval of new rules designed to make it harder to rig financial benchmarks, which are about to enter an arcane EU lawmaking process known as the trialogue.

Company News

JP Morgan Issues FX Practices Client Letter – Profit & Loss (free story)
JP Morgan has taken the unusual step of publishing a letter to its clients aimed at clarifying the nature of the trading relationship between the bank and customers, as well as to disclose relevant practices of JP Morgan when acting as a dealer, on a principal basis, in the wholesale spot FX markets.

Citi Agrees to $394 Million Settlement in US Civil Court Case – Profit & Loss(free story)
Citi has agreed to a $394 million settlement in the antitrust litigation case filed against it in the US civil courts for FX market manipulation, in addition to the $925 million it agreed to pay the Department of Justice (DoJ) to settle criminal charges.

RBS Assessing Conduct, Mulling Bonus Cuts After Currency Fine –Bloomberg
Royal Bank of Scotland Group is assessing the behaviour of employees at its investment bank and considering bonus cuts after taking a $669 million fine from US authorities for rigging currency markets.

Market Savvy  

USD Undamaged by Minutes, Better Days Ahead?
BNP Paribas
As expected, the minutes to the Fed’s April FOMC meeting showed some indication of concern with Q1 softening of data and confirmed that rate hikes as soon as the June FOMC meeting are unlikely. However, with rate markets already pricing minimal risk of tightening before December, the impact on yields was negligible, and the USD has remained resilient in the aftermath.

Battle Between Short-Term, Medium-Term Players
LMAX Exchange
Traders are now scratching their heads, trying to figure out if the US dollar rally this week is just a short-term correction within a broader dollar downtrend of the past several weeks, or if the more meaningful medium-term dollar bullish uptrend is finally starting to reassert, following a healthy correction since March.

#SaxoStrats – Buying Short-Dated EURJPY Put
Saxo Bank
Ahead of a Bank of Japan meeting expected to reveal more about BOJ QE forward thinking and an upgrade of GDP, Saxo Bank’s head of FX strategy John Hardy outlines his trade in EURJPY.

Press Releases

Greenwich Report: Corporate Derivative Use Continues to Grow – Dealers Say Not So Fast
Despite the fact corporate end users are taking the changing regulatory landscape in stride, the dealers that service them are anything but complacent. Dealers trading bilaterally with corporations exempt from Dodd-Frank trading and clearing mandates face a higher cost of capital than those putting on trades for clearing clients. Swaps clients with directional positions and limited trades have proven quite unprofitable for the clearing banks.

Thomson Reuters Launches eLearning Suite to Address Increasing Training Requirements for Financial Professionals
Thomson Reuters has announced an expanded suite of eLearning solutions for financial professionals facing increasing financial training requirements.

LMAX Exchange Achieves First Full Year of Profitability Following Global Expansion
LMAX Exchange has announced its first full year of profitability, with reported annual net profits of £0.5 million in 2014.

Industry Events