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Foreign Exchange

April 2014

Hausfeld LLP represents parties that engaged in foreign exchange ("FX") transactions with the world's largest banks and their subsidiaries. This lawsuit alleges that these banks colluded to manipulate FX benchmark rates - the WM/Reuters rates - at the expense of their counterparties. These rates have significant influence in the $5.3 trillion-a-day FX market and are based on actual trades in the FX market.

Plaintiffs allege that the Defendant banks colluded in order to manipulate the WM/Reuters Closing Spot Rates in three ways. First, the FX traders allegedly manipulated the rates by "front-running" client trades, whereby the traders colluded with one another to execute a series of trades just prior to 4:00 pm GMT in order to drive up the prices of the currencies their customers were interested in buying and thereafter purchasing the currencies that their customers sold at a less-than-favorable rate. Second, the FX traders allegedly engaged in a "banging the close" strategy in which they coordinated with one another to make a large number of trades in a manner that exerted the most possible pressure on the WM/Reuters Closing Spot Rates (i.e., buying or selling client orders in installments rather than all at once). Finally, the FX traders allegedly hid their collusion by "painting the screen," whereby they placed orders with one another to have the rate move in the desired direction only to reverse these trades after the rate was calculated.

In addition to the private lawsuit, numerous governmental authorities are investigating the banks' conduct in the FX market, including the U.S. Department of Justice's Criminal and Antitrust Divisions; the U.S. Commodities Futures Trading Commission ("CFTC"); the U.S. Office of Comptroller of the Currency ("OCC"); the U.S. Securities and Exchange Commission ("SEC"); U.K. Financial Conduct Authority ("UK-FCA"); the European Commission ("EC"); the Swiss Competition Commission ("WEKO"); the Swiss FINMA; Germany's Federal Financial Supervisory Authority ("BaFin"); the Monetary Authority of Singapore ("SGMA"); the Autralia Securities and Investment Commission ("ASIC"); the New Zealand Commerce Commission ("NZ-CC"); and the Hong Kong Monetary Authority ("HKMA").

Practice Areas: Antitrust / Competition

 

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