The Competition Commission has cobbled together more detailed evidence demanded of it by banks almost a year ago in its case against their allegedly collusive currency traders.
In a 61-page affidavit, the commission outlines how 36 individuals with ties to 23 financial institutions conspired to rig trades involving the dollar-rand currency pair.
The claims of collusion range from sharing information about customer orders to fixing prices, all with a view to eliminating competition and co-ordinating trading activity to boost profit for the trading clique.
This new information should strengthen the commission’s case, which has come under fire for being prematurely referred to the Competition Tribunal. Damning findings against banks in similar cases overseas, which Bloomberg reports have resulted in more than $10bn in penalties since 2013, may have bolstered it.
The Competition Commission first announced it was investigating collusion in the foreign exchange market in April 2015. It referred the case, then against 18 banks, to the tribunal in February 2017, but was met with a raft of exception applications as banks complained that the "vague and embarrassing" referral affidavit contained too little detail of their wrongdoing.
The tribunal was due to hear these exceptions in January, but this was postponed to July 30, following the commission’s latest affidavit, filed in December.
In its third attempt, it relies almost entirely on records of conversations between traders on online instant-messaging platforms such as the Bloomberg Chatroom.
The co-operation of Citibank, which settled via a R69.5m fine in March, would also have helped. Similarly, Barclays Capital, Barclays Bank and Absa have applied for leniency, which will be granted at the end of the case, provided they have not withheld any information.
However, the extent of the evidence varies. Details of alleged collusion by then BNP Paribas trader Jason Katz runs for 18 pages, while Standard Bank’s involvement is limited to three lines, that the bank’s Bryan Brownrigg had "discussed" the bid-offer spread with Barclays Capital’s Peter Taylor.
Katz admitted to fixing prices in currency trades before a US court in January 2017, while BNP Paribas US pleaded guilty on Friday to collusion in the foreign exchange market. The bank is co-operating with the US government’s criminal investigation into that market, the Financial Times reports.
Traders, meanwhile, have denounced the commission’s averment that collusive behaviour "could reasonably be expected to affect the value of the South African rand generally and vis-a-vis the US dollar".
While collusion may have temporarily magnified volatility, in the long term the rand’s value was driven by much larger factors such as whether or not emerging markets were in favour, said Greg Davies, head of wealth at Cratos Capital.
More than $5.1-trillion is traded every day in the foreign exchange market, with average daily trade in the rand estimated at about $50bn.
Petri Redelinghuys, a stockbroker and founder of Herenya Capital, said traders had little reason to affect the value of the rand over the long term, but could exaggerate short-term moves to make money.
The commission, which is seeking fines equal to 10% of banks’ turnover, has joined five related-party entities to the case on the basis that their initial omission was "inadvertent".
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