Financial-Market Collusion: FX Fix Windows, LIBOR Submissions and Municipal Bids

Financial benchmark antitrust collusion uses agreements among competitors to change the prices and returns tied to a benchmark. Citicorp admitted FX coordination in its criminal plea. Deutsche Bank admitted rigging LIBOR contributions with other banks under its deferred prosecution agreement. Municipal investment bid rigging reaches the same pocket through a different door: providers agree who wins and who submits a bid designed to lose. If you know who gave the instruction, which position benefited or why a bidder held back, you may know the part of the transaction the customer never saw.

The Same Economic Question, Three Different Mechanisms

A chat followed by trading around a fix, a trader’s request followed by a benchmark submission, or a bid sheet prepared after someone has already chosen the winner: each connects an instruction to a price. Following that decision explains who benefited and whose money was on the other side.

FX Fix Windows and the Offer a Rival Withheld

FX fix-window coordination can involve both trading together and agreeing to hold back. In its criminal plea agreement, Citicorp admitted participating in a conspiracy among competing dealers in the euro/U.S. dollar spot market. Traders in the conspiracy used an exclusive chat room, coordinated around benchmark fixes and withheld bids or offers to protect rivals’ open positions.

Withholding an offer protects a rival by removing a competing price from the market. The chat can explain a decision the customer sees only as a missing bid.

A person who handled the trading may be able to connect the chat’s timing with the position being protected and the trades around the fix. Someone reviewing the resulting exchange rate alone sees the outcome. The insider may know which competing bid or offer the traders agreed to remove.

The Justice Department’s bank announcement also described separate FX plea agreements involving Barclays, JPMorgan and Royal Bank of Scotland. The shared practice was coordination in dollar and euro spot trading.

LIBOR Submissions and the Trading Position Behind the Rate

LIBOR manipulation can change a price through the submitted rate itself. Under its deferred prosecution agreement, Deutsche Bank admitted manipulating LIBOR and participating in a price-fixing conspiracy by rigging Yen LIBOR contributions with other banks, as the Justice Department’s announcement explains.

The criminal charging document shows why the currency and the communication matter. Its wire-fraud charge describes a scheme to cheat counterparties to interest-rate derivatives by secretly manipulating the benchmark rates tied to the trades’ profitability. It follows an electronic chat between a U.S. dollar derivatives trader and a U.S. dollar LIBOR submitter, then the bank’s submission to Thomson Reuters, then publication of the rate.

The separate price-fixing charge concerns an agreement to fix the price of Yen LIBOR-based derivatives by fixing Yen LIBOR. A conversation inside the dollar business and an agreement among banks in the yen business explain different parts of the case.

For a submitter or trader, the useful connection runs from the request to the trading position, the number submitted and the instrument priced from it. Who wanted the rate changed? What position benefited? Which other bank participated? The communications and submissions can connect those decisions.

The rate was part of the mechanism that determined the counterparty’s return. Changing the input could favor the bank’s trading book while the other side dealt at a price tied to that input.

Municipal Investment Bids That Were Designed to Lose

Municipal investment bid rigging can reduce the interest a public body earns on its money. A criminal charging document alleged that a municipal-finance marketer and investment providers chose winners in advance, arranged deliberately losing bids and promised the losers future contracts.

States, cities, school districts and other public bodies issue bonds to finance projects and other needs. They often invest the proceeds while waiting to spend them. Banks, insurers and other financial businesses sell investment agreements tailored to those funds. In the typical interest-rate competition described in the charging document, the provider offering the highest rate wins.

A school district or city earns less interest on its money, while the provider makes more throughout the contract. The public loses the return that competition was supposed to secure.

The JPMorgan municipal-bids account describes intentionally losing bids exchanged for future investment work.

The same criminal document alleged that a broker passed competitors’ bid information to the marketer, who adjusted the provider’s bid. On some occasions, the broker suggested exactly how the bid could change to increase the provider’s profit and still win.

Brokers could help draft specifications, choose which providers to invite and receive their bids. That position gave them access to information the competing providers were not supposed to share.

Providers typically certified that they had not consulted competitors about their bids and that bidders had equal opportunities. Brokers could also certify the bidding process. The charging document alleged that false certifications accompanied the manipulated bids. The paperwork presented a competition the underlying conversations had already taken away.

JPMorgan’s separate non-prosecution agreement also carried admissions about employees manipulating bids for municipal bond investments and contracts managing issuance risks. That corporate admission and the marketer’s charging document show the same market from different positions inside it.

What the Trading and Bid Records Show

The strongest explanation connects the instruction to the transaction it changed. FX chats sit beside positions and fix-window trading. LIBOR requests sit beside the submitted rate and the derivatives position. Municipal bidding communications sit beside bid sheets, certifications and later contract allocations.

Timing gives those records meaning. A broker who disclosed a competitor’s rate before the winning bid was fixed supplied information the recipient could act on. A promise of future business can explain why another provider agreed to lose. The next contract may explain the previous bid.

The connection here is practical: someone who knows how the bid or submission was made can explain the decision behind a pattern in the numbers.

Dealer Control Over the Price a Customer Could Reach

The private credit-default-swaps complaint offers a parallel involving access to prices and competing trading platforms. It alleged that dealer banks blocked licenses needed by a proposed exchange and agreed to boycott it. It also described a gap between indicative quotes distributed to customers and the price available when a customer tried to trade:

The allegations put the dealer’s control over access beside its control over quoted prices. For an insider, the relevant knowledge may concern who controlled the trading channel and which instructions kept a competing platform from operating.

Civil Penalties, Private Settlements and Whistleblower Awards

A regulatory penalty, a private settlement fund and a whistleblower award answer different questions about the same financial market.

The Justice Department reported an $800 million Commodity Futures Trading Commission civil penalty in Deutsche Bank’s LIBOR resolution.

The private FX litigation resolved alleged coordination of foreign-exchange pricing and benchmarks through settlements with bank groups. The court’s fee opinion identifies a $2,310,275,000 gross settlement fund. That fund addressed claims by purchasers injured by the alleged coordination of foreign-exchange pricing.

The CFTC’s October 21, 2021 award announcement concerned nearly $200 million awarded to a whistleblower. The agency said the person’s original information substantially advanced an already open investigation and led it to important, direct evidence. The award also reflected successful related actions by a U.S. federal regulator and a foreign regulator.

The agency states that whistleblowers can receive between 10 and 30 percent of the monetary sanctions collected.

The distinction is useful to someone inside a bank. The customer may have a claim arising from the transaction. The employee may hold information that moves an investigation forward. The CFTC example shows the value of that information even after investigators have begun their work.

Financial-Market Whistleblower Cases Follow the Conduct

The trade, the agreement and the money affected guide our assessment of a financial-market whistleblower case. We work through the antitrust and financial-regulator questions with you and identify the whistleblower lawyers whose experience fits the conduct.

If the coordinated financial transaction involved government money, we examine the payment claim and the statements supporting it. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Number Was Chosen

Our whistleblower experts can connect a trader’s communication with the fix window, rate submission or municipal bid it affected.