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Rand rigging said to have spanned New York to Johannesburg

Regulators said to consider leniency for banks that cooperate.

South African antitrust authorities are accusing traders at banks in New York and Johannesburg of colluding to manipulate the value of the rand, according to a person familiar with the investigation.

Prosecutors for the Competition Commission say the banks used the Reuters trading platform and Bloomberg chat-rooms as part of a conspiracy to rig the exchange rate of the rand. While the regulator will seek the maximum fines, banks that have cooperated are likely to be granted leniency, the person said, asking not to be identified because some of the information has not been made public.

The commission identified more than a dozen international and local lenders, including Bank of America Merrill Lynch, HSBC Holdings, BNP Paribas, Credit Suisse Group, HSBC Holdings, JPMorgan Chase & Co, as having participated in price fixing and market allocation in the trading of foreign currency pairs involving the rand since at least 2007. It referred the case to an antitrust tribunal, concluding an investigation that began in 2015.

“The respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times,” the Pretoria, South Africa-based commission said in an e-mailed statement on Wednesday. “They assisted each other to reach the desired prices by coordinating trading times. They also created fictitious bids and offers, distorting demand and supply in order to achieve their profit motives.”

Remove Incentives

The prosecution should be shorter than most antitrust cases, due to the straightforward nature of the matter, the person said. Regulators aren’t seeking specific action against individual traders from the banks, but are likely to make demands to change incentives which encourage traders to push the boundaries, the person said.

Other lenders named in the probe include Johannesburg-based Standard Bank Group, Investec, which has units in South Africa and the UK, Standard Chartered, Commerzbank, Macquarie Group, Australia & New Zealand Banking Corporation. While Barclays Plc was named as being part of the lenders that were referred for prosecution, the commission didn’t name it among those facing penalties.

While Barclays and Citigroup with investigators from early on in the probe, it isn’t clear yet how this will eventually impact any action taken against them, the person said. Citigroup, which was named among those being investigated when the probe first started in 2015, isn’t being considered for a possible penalty, the person said.

Barclays Africa, about 50% owned by Barclays, said in an e-mailed statement on Wednesday it has cooperated with the commission and will continue to do so. Citigroup declined to comment in an e-mail on why it wasn’t on the list of banks facing a fine. Barclays declined to comment.

The commission recommended the banks be fined 10% of their turnover, the maximum allowed.

© 2017 Bloomberg

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