The European Commission fines Barclays, RBS, Citigroup, JPMorgan and MUFG €1.07 billion for participating in foreign exchange spot trading cartels

On May 16^th, 2019, the European Commission announced that it has entered into two settlements decisions with five banks (Barclays, The Royal Bank of Scotland, Citigroup, JPMorgan and MUFG), which have been fined €1.07 billion for taking part in two cartels in the Spot Foreign Exchange market for 11 currencies – namely Euro, British Pound, Japanese Yen, Swiss Franc, US, Canadian, New Zealand and Australian Dollars, and Danish, Swedish and Norwegian crowns.

The decisions are the following:

1. the decision on the so-called “Forex – Three Way Banana Split” cartel, which imposes a total fine of around €811 million on Barclays, The Royal Bank of Scotland (RBS), Citigroup and JPMorgan; and
2. the decision on the so-called “Forex- Essex Express” cartel, which imposes a total fine of more than €250 million on Barclays, RBS and MUFG Bank (formerly Bank of Tokyo-Mitsubishi).

UBS was not fined since, as a leniency applicant, revealed the existence of the cartels to the Commission.

The Commission’s investigation revealed that some individual traders in charge of Forex spot trading of these currencies on behalf of the relevant banks exchanged sensitive information and trading plans, and occasionally coordinated their trading strategies through various online professional chatrooms.

The commercially sensitive information exchanged in these chatrooms related to:

1. outstanding customers’ orders (i.e. the amount that a client wanted to exchange, the specific currencies involved, as well as indications on which client was involved in a transaction),
2. bid-ask spreads (i.e. prices) applicable to specific transactions,
3. their open risk positions (the currency they needed to sell or buy to convert their portfolios into their bank’s currency), and
4. other details of current or planned trading activities.

The information exchanges among competitors in the Foreign Exchange market enabled them to make informed market decisions on whether and when to sell or buy the currencies they had in their portfolios, and to identify opportunities for coordination, for example through a practice called “standing down” (whereby some traders would temporarily refrain from trading activity to avoid interfering with another trader within the chatroom).

The Commission’s investigation revealed the existence of two separate infringements concerning foreign exchange spot trading:

• The Three Way Banana Split among traders from UBS, Barclays, RBS, Citigroup and JPMorgan. The infringement started on 18 December 2007 and ended on 31 January 2013.
• The Essex Express among traders from UBS, Barclays, RBS and Bank of Tokyo-Mitsubishi (now MUFG Bank). The infringement started on 14 December 2009 and ended on 31 July 2012.

The fines imposed on each undertaking are the following.