UK-based multinational bank Standard Chartered Bank (SCB), one of more than 20 financial entities to be prosecuted by the Competition Commission of South Africa for manipulating the USD/ZAR currency pairing, has admitted guilt and agreed to pay a R42.7 million fine.
And while the SCB settlement agreement has been filed with the Competition Commission Tribunal for confirmation on Wednesday, the adjudication process with the remaining respondents, which include international and local financial institutions, continues.
The eight-year litigation process between the Commission and SCB – which is the official shirt sponsor of England’s Liverpool Football Club, began in April 2015 when the Commission launched a complaint against it, and the other Respondents, for allegedly agreeing to manipulate prices related to certain foreign currency pairs tied to the South African rand (ZAR).
At that stage, explains Commission spokesman Siyabulela Makunga, the complaint was against the following entities:
– Barclays Bank Plc
– Barclays Africa Group Ltd
– BNP Paribas
– BNP Paribas South Africa
– Citigroup Inc
– Citigroup Global Markets (Pty) Ltd
– JP Morgan Chase & Co
– JP Morgan South Africa
– Investec Ltd
– Standard New York Securities Inc
– Standard Chartered Bank
In August 2016, however, the Commission amended the complaint, adding the following respondents:
– ABSA Bank Limited
– Barclays Capital Inc
– Credit Suisse Group
– Commerzbank AG
– Bank of America
– Merrill Lynch International Limited
– HSBC Bank Plc
– Citibank N.A
– JP Morgan
– Nomura International Plc
– Macquarie Group
– JP Morgan Chase Bank N.A
This amendment included allegations of market allocation (agreements in which competitors divide markets among themselves) through customer allocation (the process of assigning or distributing resources, products, or services to specific customers or customer segments).
The Commission accused the Respondents of conspiring to assist each other by allowing a trader with a significant open risk position to complete trades before others, and manipulate liquidity, which is contrary to typical market trading practices.
In February 2017, the Commission referred the matter to the Competition Commission Tribunal for adjudication. The investigation found that:
- Between 2007 and 2013, SCB and its counterparts were involved in a scheme to fix prices of ZAR currency pairs through various communication channels, including instant messaging platforms.
- SCB and its competitors collaborated to allow a trader with a substantial open risk position to complete trades ahead of others and manipulated liquidity, deviating from typical market trading practices.
- These actions constituted price fixing and market allocation.
SBC settlement agreement with Competition Commission.
In terms of the settlement agreement, Makunga says SCB admits liability to the manipulation of USD/ZAR currency pairing and has agreed to pay an administrative penalty of R42,715,880 .
SCB participated in the manipulation of USD/ZAR currency pairing by fixing bids; offers; bid-offer spreads; the spot exchange rate; and the exchange rate at the Financial Information eXchange, an electronic communications protocol initiated in 1992 for international real-time exchange of information related to securities transactions and markets.
“Further, SCB participated in dividing markets by allocating customers in terms of which one trader withholds or pulls his/her existing bid or offer from the market to allow the other trader to execute and complete his/her trade.”
He adds that the settlement comes at a time when respondent banks are currently appearing before the Competition Appeal Court (CAC) seeking an order to set aside a March 30, 2023 Tribunal order for respondent banks to file their answers to the complaint referral. The hearing for the appeals and reviews before the CAC is set for November 13 to 16, 2023
Competition Commissioner Doris Tshepe welcomes SCB’s decision to reach a settlement on this matter and encourages other respondent banks to consider settling the complaint against them.
“Further, this settlement affirms the Commission’s pursuit of allegations related to the manipulation of the USD/ZAR currency pair, given the ultimate impact of the currency manipulation on the value of the South African Rand.”
Citibank N.A settled the same conduct with the Commission in 2017.