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The dark and ‘smoke-filled’ chatroom that could sink rogue forex traders

Joining covert instant messaging platforms indicates willingness to participate in currency conspiracy. Apparently.

The mere fact that bank traders accepted invitations to join covert instant messaging platforms is a strong indication of their involvement in a rogue conspiracy to manipulate the rand/US dollar currency pair, the Competition Commission has argued.

The commission’s serially-delayed case against bank currency traders is heating up, with the watchdog saying there was a clear intention by traders to rig currency trades to boost profits.

Acting for the commission, advocate Tembeka Ngcukaitobi said the acceptance by bank traders to join instant messaging platforms, which he described as “smoke-filled darkrooms” was “an acceptance to a conspiracy.”

Ngcukaitobi was arguing before the Competition Tribunal on Wednesday. Hearings into the commission’s case of currency-rigging, which was referred to the tribunal in February 2017, began on Monday.

The case implicates more than 30 individuals linked to 23 banks, among them Standard Bank of SA, Investec Bank, Bank of America, Merrill Lynch International, BNP Paribas, JP Morgan Chase, HSBC Bank, Macquarie Bank, Barclays Capital, Standard New York Securities, Nomura International and Credit Suisse Group.

The commission found that from at least September 2007, traders from competing banks entered into a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading. In doing so, they allegedly used platforms such as the Reuters currency trading platform and the Bloomberg instant messaging system (chatroom), as well as telephone conversations and meetings, to coordinate their alleged collusive trading activities. 

“It’s clear what the general or overarching agreement was all about,”said Ngcukaitobi. “The Bloomberg chatroom simply provided a forum – it is a smoke-filled darkroom and when you [the traders] got in [the chatroom], you knew fully what you were getting yourself into.

“And when you stayed, you knew precisely what you were staying for because you knew the type of information that was [being] communicated. When you were inside, you participated in several activities in the chatroom.”

By merely being a participant in the chatroom, Ngcukaitobi said, bank traders accessed and shared sensitive information that is not in the public domain including customer currency orders and their personal information, successful trades and volumes, whether traders held long or short positions, and trading strategies.

“We had a group of traders involved in currency manipulation,” he said. “And each and every one of those traders, whether they sent one message or 20 messages, the fact is their membership on the platform itself violates section 4(1) b of the Competition Act, as they had access to competitively sensitive information which enabled them to decide their trading strategies.”

Section 4 prohibits the conduct arising out an agreement among various parties to fix prices or collude.

Bank objections

The merits of the case have not been heard as the tribunal is still hearing technical issues including exceptions/objections by banks to the charges. These objections include whether the commission had jurisdiction over foreign entities, the request for clarity of evidence and the lapse of the three-year period to bring charges.

Once these exceptions have been argued, the tribunal panel led by advocate Norman Manoim will decide whether the commission’s case should be heard by the tribunal, thrown out or referred back to the commission.

Banks have been scathing of the commission’s case, saying that it is relying on broad accusations that lack hard evidence. Wim Trengove SC, who is acting for Investec Bank, argued that the bank had no understanding of what the alleged general agreement to collude among traders – the nub of the commission’s case – refers to, or where and how it came into existence.

Alfred Cockrell SC, who spoke on behalf of HSBC Bank, Bank of America and Credit Suisse, supported Trengove’s views, saying that banks are confused as to whether the commission is referring to an overarching agreement or a series of agreements that contravene the Competition Act.

However, Ngcukaitobi said the commission’s case is clear. “There is enough on these facts to show that this [entering instant messaging chatrooms] was an arrangement between all participants. The mere manipulation of the currency is enough [to bring charges].”

The commission is pushing for a 10% fine on annual turnover against the banks or for them to settle with it – as in the case of Citibank, which paid an administrative penalty of R69.5 million in March 2017.

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The banks have one major problem : some of their buddies have sung like canaries. Citibank cooperated and paid a R70m fine, and ABSA has conditional immunity for cooperating.

‘’My rackets are run on strictly American lines and they’re going to stay that way’’’

Al Capone (1899-1947)
All my views:
Most of these FX Dealers (the local and overseas – rigging “chatroom screen watching junkies) are International members of the – ACI Financial Markets Association Est 1955
Methinks these unethical dealers all contravened the ACI Ethical conduct in Financial Markets by destroying the ACI’s FX Code of Conduct.
Committee for Professionalism
The ACI Committee for Professionalism (CFP) at International level engages with the ACI membership to debate challenging issues of the day. The Model Code, which has existed for many years and is seen as the global standard for such codes, is designed and written by the ACI CFP. Additionally, the CFP offers guidance to professionals in a dispute, and is willing and able to provide suggestions for resolution. The Chair of the ACI CFP is sometimes called as an expert witness in certain cases.
The CFP is responsible for the Market Practices and advises the ACI Executive Board on all decisions concerning guidelines, both technical and ethical and also on professional activities of ACI members. These guidelines comprise The Model Code. It gives advice and offers arbitration services on professional disagreements or problems having an international character.
The CFP formulates and proposes policies and guidelines establishing the educational and professional standards for members of ACI. It produces specialized reports relating to market issues e.g. risk management, crisis management.
I would strongly recommend that Competition Commission make contact with ACI FX Global via the FX ACI Johannesburg, with regards to both the local and International banks for guidance.
I am absolute appalled by the arguments so far raised by Wim Trengrove on behalf of Investec (that are currently been sued by the Randgold minority shareholders for a range of shenanigans and ‘’obstructive conduct ‘’ in the Kebble-gate sage (Koko). I just don’t believe the ‘’ode to the cliché’’ that your argument must have structure and or that your ‘’Trendgoving’’ will ever convince me.
This is what Stephen Koseff had to say on the – ANC Policy Conference Breakfast on July 4, 2017
“This (read Democratic freedom) is a ticking time bomb that must urgently be defused. Simultaneously, we must also root out the scourge of corruption and inefficiency. It’s a shame that the National Development Plan is not being implemented at the pace intended’’ – Oh really- meanwhile back at the ranch your bank has got their fatty fingers in the USD/ZAR till!

Could not have put it better. Investec, the darling of crooks …

Hmm I’m not sure what is worse. A president and his mates trashing the reputation of a country, stealing from its taxpayers and fraudulent enriching themselves or banks colluding to control a currency value.
Seems like opportunities all round…..and the loser is…..the taxpayer, whichever way you look at.
Perhaps a taxpayers revolt would even things out.

Not that i have a better solution, but unfortunately a tax revolt would lead to an infrastructure collapse that will be far more expensive to rebuild than it was to maintain, and the big loser will be, you guessed it, the taxpayer once again.

Both !

Every one cent in Government corruption, matches/needs a private sector as a counter-party!

Fines…what about the people who loses money…they never get compensation

‘’In war, truth is the first casualty’’
Aeschylus
All my views:
Bloomberg on June 11, 2013 broke an article confirming in many ways that currency rates were and had being rigged in the world – albeit indirectly. The confirmed that dealers at banks rig currency rates to profit from customers – benchmarking foreign exchange rates used to set the value of trillions of dollars of investments.
Typically, like these local ‘’dark room screen watching criminal junkies’’ have been front running client orders and rigging WM/Reuters rates by pushing through trades through the ‘’buying order and or stop loss order’’ limits that were set by the customers.
Banks like Investec only pay ‘’lip service’’ and ignore the fact that rigging destroys the ‘’price mechanism’’ that all licensed FX service providers are under obligation to adhere to – under the conditions of their licenses. Without any moral compass, Investec’s and other banks involved in this scandal/fraud are destroying the ‘’price mechanism’’ that amounts to no less than ‘’the anchor of our entire economic system’’.
These dealers should all be debarred as soon as possible and criminally charged as they not only contravened all the relevant codes of conducts that they are bound to adhere to, but they blatantly bypassed and messed up the consequences of unethical behaviour, to cover their tracks –
But so far, true Investec style, they are running like hell, deny , deny, deny , with the assistance of their fancy lawyers that they will be paying hundreds of millions of Rands, as long as they can carry on screwing their clients by ripping ‘’the poepol out of the chicken’’, methinks!
The FX Market in SA will be doomed if these dealers/bankers aren’t brought to boo now!

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