JPMorgan weighs chat room ban amid probes

‘THE CARTEL’::Global regulators are investigating an instant-messaging group that had included Citigroup, RBS and Barclays traders suspected of manipulating benchmark rates

Bloomberg

Wed, Nov 13, 2013 - Page 15

JPMorgan Chase & Co, the biggest US bank by assets, is weighing whether to ban traders from using electronic chat rooms to communicate with peers at other firms as the forums draw scrutiny from global regulators, according to a person with knowledge of the matter.

JPMorgan’s deliberations, which should be complete by early next year, focus on multi-dealer chat rooms for currencies and other asset classes, said the person, who requested anonymity because the talks are private.

Royal Bank of Scotland Group PLC, Britain’s biggest publicly owned lender, and Zurich-based Credit Suisse Group AG, Switzerland’s second-largest bank, also are reviewing chat room use, two other people said.

Regulators have targeted traders’ electronic messages, using them as evidence of wrongdoing in their investigations into the manipulation of benchmark interest rates and foreign-exchange markets. During a visit to London last month, JPMorgan chief executive officer Jamie Dimon called on employees to be vigilant about language in e-mails and instant messages, two people with knowledge of the matter said then.

JPMorgan may encourage traders to use telephone calls and e-mails rather than chat rooms to assist clients in large currency transactions, the person with knowledge of the matter said.

Barclays PLC, UBS AG and New York-based Citigroup Inc also are among banks reviewing the use of chat rooms, the Wall Street Journal reported on Sunday, citing unidentified people at those companies and others that do business with them.

An instant-messaging group involving traders at firms including Citigroup, RBS and London-based Barclays is being scrutinized by regulators investigating potential manipulation of the foreign-exchange market, four people with knowledge of the probe said last month. Over at least three years, the dealers exchanged messages via Bloomberg terminals outlining details of positions and client orders, and made trades before benchmarks were set, two of the people said.

The roster of firms changed over time and included other banks such as Zurich-based UBS as the men switched employers, one of the people said.

The message group was referred to as “The Cartel,” according to two traders who were not involved in the conversations.

The four banks account for more than 40 percent of trading in the US$5.3 trillion-a-day foreign-exchange market, according to a survey by Euromoney Institutional Investor PLC.

The UK’s Financial Conduct Authority last month opened a probe into currency trading, joining a global investigation that also involves regulators in the US, EU and Switzerland.

Bloomberg News reported in June that traders at some banks said 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. In August, Bloomberg News reported that recurring spikes in trading around the periods in which the rates are calculated suggested that dealers may have been trying to influence the benchmarks.