Barclays, Citigroup among banks sued over exchange rates

Bloomberg

Sun, Nov 03, 2013 - Page 13

Barclays PLC, Citigroup Inc and five other major banks were sued over allegations they conspired to manipulate WM/Reuters rates used for determining foreign exchange prices.

A Haverhill, Massachusetts, benefit fund filed a complaint on Friday in a Manhattan federal court accusing the banks of violating US antitrust law by fixing the rates. WM/Reuters rates are an industrywide standard used in determining closing prices in the US$5.3 trillion-a-day 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 United States, including FX 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 the banks violated Section 1 of the Sherman Antitrust Act. The other banks named in the complaint are Credit Suisse Group AG, Deutsche Bank AG, JPMorgan Chase & Co, Royal Bank of Scotland PLC and UBS AG.

Federal investigators have been probing possible manipulation in the foreign exchange market, as well as allegations of rigging of the London interbank offered rate, or LIBOR, an interest rate benchmark. On Wednesday, government-owned mortgage financier Fannie Mae sued nine banks claiming that their manipulation of LIBOR caused about US$800 million of losses on swap contracts and other investments.

WM/Reuters rates are published hourly for 160 currencies and half-hourly for the 21 most-traded. 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 Co, a unit of Boston-based State Street Corp and Thomson Reuters Corp.

Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing news and information, as well as currency-trading systems.

UBS spokeswoman Karina Byrne also declined to comment on the lawsuit.

The Zurich-based bank said in a third-quarter earnings report released Tuesday that it is aware US and European authorities, including the US Justice Department, were probing the possibility of manipulation of the foreign exchange business.

“Following an initial media report in June 2013 of widespread irregularities in the foreign exchange markets, we immediately commenced an internal review of our foreign exchange business,” the company said in the report.

UBS said it is cooperating with authorities and has “taken and will take appropriate action with respect to certain personnel as a result of our review, which is ongoing.”