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Big banks sued for manipulating forex rates

Published Nov 4, 2013

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New York - Barclays, Citigroup and five other major banks are being sued over allegations that they conspired to manipulate benchmark rates used to determine foreign exchange prices.

A US-based benefit fund filed a complaint on Friday in Manhattan Federal Court accusing the banks of violating US antitrust law by fixing WM/Reuters rates.

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These rates are an industry-wide standard used in determining closing prices in the $5.3 trillion-a-day (R53 trillion) foreign exchange market, according to the complaint.

“Defendants’ manipulation of WM/Reuters rates affected the pricing of trillions of dollars’ worth of financial transactions in the US, including FX [foreign exchange] trades and other instruments such as pensions and savings accounts that track global indices,” lawyers for the Haverhill Retirement System said in the filing.

The fund, suing on behalf of all similarly situated investors, alleges that the banks violated section 1 of the Sherman Antitrust Act. The other banks named in the complaint are Credit Suisse, Deutsche Bank, JPMorgan Chase, Royal Bank of Scotland and UBS.

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Federal investigators have been probing possible manipulation in the foreign exchange market, as well as allegations of rigging of the London interbank offered rate (Libor), an interest rate benchmark.

On Thursday, government-owned mortgage financier Fannie Mae sued nine banks claiming that their manipulation of Libor caused about $800 million of losses on swap contracts and other investments.

Bloomberg reported in June that traders at some banks said that they shared information about their positions through instant messages, executed their own trades before client orders and sought to manipulate the benchmark WM/Reuters rates.

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In August, Bloomberg reported that recurring spikes in trading around the periods in which the rates were calculated suggested that dealers might have been trying to influence the exchange rate benchmarks.

WM/Reuters rates are published hourly for 160 currencies and half-hourly for the 21 most-traded units. They are the median of all trades in a minute-long period starting 30 seconds before the beginning of each half-hour. Rates for less-widely traded currencies are based on quotes during a two-minute window. The data are collected and distributed by World Markets, a unit of State Street, and Thomson Reuters. – Bloomberg

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