A group of the world's largest banks are under investigation by the US justice department for allegedly restricting competition in the multi-trillion dollar foreign exchange and bond markets.
Federal investigators are looking into the electronic currency exchange FXAll, owned by 17 of the best-known financial institutions on Wall Street and in the City of London. The investigation aims to establish whether FXAll illegally elbowed out rival services.
The backers of the online marketplace include Citigroup, JP Morgan Chase, Goldman Sachs and Credit Suisse First Boston.
A spokeswoman for the justice department said: "The anti-trust division is looking at the competitive effects of certain joint ventures in the online bond trading industry as well as the foreign exchange industry." She said the investigation was "active and ongoing" but refused to give details.
European competition commissioner Mario Monti said he might also launch an investigation. "This is a type of problem that does concern the commission."
More than US$1.2 trillion is traded each day on the currency markets, among some of the least regulated financial exchanges in the world. Online trading is growing rapidly because of its ability to provide real-time information on pricing and market movements.
The justice department has informed the US Congress of the investigation. The concerns outlined include an undertaking by the founding members of FXAll not to work with competing online services.
Smaller rivals, including Currenex and a service owned by State Street Boston Group, have attempted to edge their way into the sector. Another platform, Ariax, put together by Deutsche Bank, Reuters, Chase Manhattan and Citibank, folded last month.
FXAll has maintained that it is acting within the law. None of the banks contacted had any comment on the reports.
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