As promised, the Justice Department has extracted guilty pleas in FX rigging cases involving JP Morgan, Citi, RBS, and Barclays and as we said twice last week and once this morning, the banks received waivers which ensured that none of the penalties that should rightfully be associated with those pleas will actually apply to the banks.
What do traders say to one another when conspiring to rig a $5 trillion-a-day market you ask? Here are some examples from the Barclays consent order:
One particular chat room, referred to by the participating traders and other traders as the “Cartel” included FX traders from Citigroup, JP Morgan, UBS, RBS and Barclays who specialized in trading the Euro.
One Barclays FX trader, when he became the main Euro trader for Barclays in 2011, was desperate to be invited to join the Cartel because of the trading advantages from sharing information with the other main traders of the Euro. After extensive discussion of whether or not this trader “would add value” to the Cartel, he was invited to join for a “1 month trial,” but was advised “mess this up and sleep with one eye open at night.”
On one occasion, a Barclays FX trader explicitly discussed with a JP Morgan trader coordinating the prices offered for USD/South African Rand to a particular customer, stating, in a November 4, 2010 chat, “if you win this we should coordinate you can show a real low one and will still mark it little lower haha.” After the JP Morgan trader suggested that they “prolly shudnt put this on perma chat,” the Barclays trader responded “if this is the chat that puts me over the edge than oh well. much worse out there.”
On June 10, 2011, the Barclays trader stated explicitly in another chat that “we trying to manipulate it a bit more in ny now . . . a coupld buddies of mine and I.”
As the future Co-Head of UK FX Hedge Fund Sales (who was then a Vice President in the New York Branch) wrote in a November 5, 2010 chat: “markup is making sure you make the right decision on price . . . which is whats the worst price i can put on this where the customers decision to trade with me or give me future business doesn’t change . . . if you aint cheating, you aint trying.”
And here's The NY Times summing up what today's hollow admissions and paltry fines actually mean for the banks and traders who engaged in this "brazen heads I win tails you lose" trillion-dollar conspiracy:
For the banks, though, life as a felon is likely to carry more symbolic shame than practical problems. Although they could be technically barred by American regulators from managing mutual funds or corporate pension plans or perform certain other securities activities, the banks have obtained waivers from the Securities and Exchange Commission that will allow them to conduct business as usual. In fact, the cases were not announced until after the S.E.C. had time to act.
And at least for now, the Justice Department did not indict any traders or sales employees whose errant instant messages underpin the criminal cases against the banks. The banks long ago dismissed most of the employees suspected of wrongdoing, though the New York State financial regulator, Benjamin M. Lawsky, forced Barclays to dismiss eight additional employees thought to be at the center of the scheme.
In sum: fines which amount to a tiny fraction of the amount of money that was likely made as a result of gaming the fix, no consequences in terms of curtailing the banks' businesses, and eight new "dismissed" traders who will promptly find other lucrative job opportunities in the still-corrupt world of high finance.