Royal Bank of Scotland: When Rival Traders Agreed to Stand Aside

The Royal Bank of Scotland FX price fixing case concerned an agreement among RBS and rival dealers to manipulate U.S. dollar and euro spot trading. In its criminal plea agreement, RBS admitted participating in coordinated trading that suppressed competition. The traders protected each other’s positions through decisions about when to trade and when to stay out of the market. If you worked with those orders or messages, you may recognize the arrangement in a trade that never happened.

The Justice Department’s May 20, 2015 announcement described the parent bank’s agreement to plead guilty alongside Citicorp, Barclays and JPMorgan Chase. RBS’s participation ran from at least as early as December 2007 until at least April 2010.

What Is Price Fixing?

Price fixing replaces independent pricing decisions with an agreement among competitors. In the RBS FX case, the criminal plea agreements described traders coordinating purchases and sales and agreeing to withhold bids or offers.

According to the Justice Department’s account of those agreements, euro-dollar traders used an exclusive electronic chat room and coded language. They called themselves “The Cartel.” The chats let traders at competing banks coordinate conduct intended to benefit their positions in the same currency market.

The Department explained the withholding arrangement in its own words:

A rival’s bid or offer could move the exchange rate against another trader’s open position. The dealer whose position benefited received help from a business that was supposed to compete with it. Customers’ orders used benchmarks those rivals had worked together to move.

How the FX Fixes Reached Customer Orders

The benchmark fixes connected coordinated dealer trading to the prices large customers paid. The criminal plea agreements, as described by the Justice Department, identified the 1:15 p.m. European Central Bank fix and the 4:00 p.m. World Markets/Reuters fix. Third parties collected trading data at those times, calculated a daily rate and published it for use in pricing many large customer orders.

That arrangement put the trading activity used to calculate the benchmark at the center of the case. According to the plea agreements, the chat-room traders coordinated their purchases and sales of dollars and euros around the fixes to manipulate the benchmark rates and increase their profits. The rate calculated from those trades then became a price used for customer business.

The outside calculation did not remove the traders’ influence over its inputs. A benchmark could be published by a third party while the trades feeding it reflected an agreement among competing dealers.

The plea agreements also described exchange-rate manipulation through withheld bids and offers beyond the coordinated trading at the fixes. Those decisions protected open positions by restricting currency supply or demand.

RBS’s Plea and the Other Banks’ Conduct

RBS agreed to plead guilty to conspiring to fix prices and rig bids for dollars and euros in the FX spot market in the United States and elsewhere.

The banks’ participation periods differed. The same announcement placed JPMorgan’s involvement from at least as early as July 2010 until January 2013, later than the period it identified for RBS. The wider account described a continuing multi-bank conspiracy.

UBS’s Hidden Markups Showed Another Way Customers Lost

The same Justice Department announcement described UBS concealing markups on customer FX transactions. According to the factual statement of breach attached to UBS’s criminal plea agreement, traders and sales staff told customers that markups were not being added when they were. On other occasions, staff used hand signals to conceal the markups.

The statement also described certain UBS traders tracking and executing limit orders at a different level from the one the customer specified so they could add undisclosed markups. The customer supplied a price instruction. The trader changed the execution level to make room for a charge the customer could not see.

That comparison matters to someone working between the trading desk and the customer. RBS’s plea described coordination among rival dealers. The UBS statement also exposed deception in what a bank told its own customers about their transactions. An insider may know the customer’s instruction, the explanation given by sales staff and the trading decision behind the price. We connect those parts of the transaction with you.

What Qualifies as a Whistleblower Complaint?

For an FX price-fixing matter, a useful whistleblower account connects the agreement between competing dealers to the trading decisions it changed. We work with you to connect the conduct, the businesses affected and the harm to competition.

The messages establish what traders discussed, who participated and when. Trading and position records can show what followed and which position benefited. When the conduct involved withholding a bid or offer, the important connection may be between an instruction in the chat and the desk’s decision to stay out of the market.

Fix-window records add another connection. We examine how the timing of a conversation relates to the relevant purchases or sales, and how the resulting benchmark was used for customer orders.

The Private FX Settlements Concerned Injured Customers

The private foreign-exchange litigation produced a $2,310,275,000 gross settlement fund through fifteen settlement agreements. The district court’s November 2018 fee opinion described an alleged conspiracy among banks to fix prices in the foreign exchange market.

That fund belonged to the private customer litigation. It was separate from RBS’s criminal plea and from the regulatory resolutions announced around the bank investigation.

For a person who knows the conduct, the distinction is about their relationship to it. A customer’s claim concerns injury from the pricing. A whistleblower’s contribution is information that exposes the agreement. We assess that distinction with you and financial market whistleblower lawyers who understand the trading.

What Is the Antitrust Whistleblower Rewards Program?

The Antitrust Whistleblower Rewards Program offers potential rewards to people who bring the government new information about antitrust crimes. The Justice Department works with the U.S. Postal Service and its investigative partners under a whistleblower rewards agreement.

For an FX insider, how the trading conduct, their information and the program fit together is something our whistleblower experts assess with them.

False claims involving government money raise a separate question. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If government money was involved, our whistleblower experts assess that evidence and develop the case with you.

You Know Why the Desk Held Back

Our whistleblower experts can examine why an RBS dealer withheld an offer and how the decision affected the competing position and customer order.