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Competition Commission After Currency Manipulators at 28 Banks

Nedbank & Rand Merchant Bank have been added to the list of banks under fire by the Competition Commission case over currency manipulation. This now brings to 28 the number of local and international banks who are in the competition commission (and other international authorities) crosshairs. The scandal involves 38 different traders who work for the various banks are alleged to have been part of a conspiracy to rig the prices of currency (including the Rand).

Two of the bank traders (one who works for Barclays and one who works for Citigroup) who were investigated have already admitted to what they and others were doing. Another one of the traders (who worked for JP Morgan) has already been found guilty was convicted last year.

When?

The case relates to activities between 2007 and 2013. Remember how the rand was doing weird stuff during that time? Well, it seems the currency had a little unwanted manipulation by traders which saw it shooting up and down for seemingly no reason at the time. No reason other than profit making it turns out.

The Rand’s Rollercoaster

Here is a sample of some of the rates during those years of how the exchange rate went up and down and up and down:

2007 1 Dollar = R7

2008 1 Dollar = R10

2009 1 Dollar =R7

2010 1 Dollar =R6.80

2011 1 Dollar =R8.50

2012 1 Dollar =R7.40

2013 1 Dollar =R10.40

How Do You Manipulate Currencies?

Every day around 5 Trillion dollars worth of trade is done in the foreign currency markets. The rand is a popular currency to trade in (often making up around 15% or more of the total value of trades) Traders from different banks shared info on what they were going to buy and sell and for how much.

‘Some held off on making bids to benefit other roleplayers or even posted “fake” bids’

Some held off on making bids to benefit other roleplayers or even posted “fake” bids or offers simply to drive the prices up or down (trading often has a bit of a herd mentality to it and if some people start buying or selling others quickly follow suite).

Some of the accused traders may have used chat groups and messaging platforms to share strategies or information with one another right from the trading floor on the stock markets. While this would be fine within an organisation these were traders from competing banks and institutions.

The result was that they were able to drive the price of the Rand (and other currencies) up or down when it suited them, making Millions in profits over the years. It also caused countless harm to businesses importing and exporting as well as to the price paid for commodities such as oil – which in turn influences what people in SA pay for food.

Possible Fines

The employers of these traders could face fines of up to 10% of annual turnover if found guilty. Though it is unlikely that the fines will be so high the banks involved look likely to pay out large amounts to either settle or in fines.

 

 

*Though there are witnesses to what was done and though other countries have already found against some of these banks the competition commission has yet to rule on the matter locally. Thus the banks are currently only accused and have not yet been found guilty.