BNP Fined $246MM After Its Traders Were Found To Still Use Chat Rooms To Rig FX Trading

Two months after the Fed fined Deutsche Bank a paltry $157 million for manipulating currency markets after the German bank's traders were found to be using "chat rooms" to rig FX trading, we learn that there was more gambling going on here, and on Monday the Fed announced that it will fine French BNP Paribas $246 million "for the firm's unsafe and unsound practices in the foreign exchange (FX) markets."

According to the press release, the Board levied the fine "after finding deficiencies in BNP Paribas's oversight of, and internal controls over, FX traders who buy and sell U.S. dollars and foreign currencies for the firm's own accounts and for customers." And, not surprisingly we once again find that FX rigging was confined chat rooms:

"The firm failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions. The Board's order requires BNP Paribas to improve its senior management oversight and controls relating to the firm's FX trading."

Perhaps one day the Fed will realize that as long as its keep settling for paltry amounts that are a fraction of how much the banks make by violating the rules (and yes, participating in chat rooms), this type of behavior will never end. That day won't be today.

In its complaint, the Fed notes that during the Review Period:

  • BNPP and BNPP Securities lacked adequate governance, risk management, compliance, and audit policies and procedures to ensure that BNPP’s Covered FX Activities complied with safe and sound banking practices and applicable internal policies;
  • Certain FX traders in the spot market at BNPP, including BNPP Securities routinely communicated with FX traders at other financial institutions through chatrooms on electronic messaging platforms accessible by traders at multiple institutions.
  • BNPP’s deficient policies and procedures prevented it from detecting and addressing unsafe and unsound conduct by certain FX traders, including in communications by traders in multibank chatrooms, consisting of:
    • (i) disclosures of trading positions and discussions of coordinated trading strategies with traders of other institutions;
    • (ii) discussions about anticipated FX benchmark fix-related trading and submissions with traders of other institutions;
    • (iii) disclosures to traders of other institutions of confidential customer information of BNPP;
    • (iv) discussions regarding bid/offer spreads offered to FX customers with traders of other institutions; and
    • (v) discussions of trading in a manner to trigger or defend certain FX barrier options within BNPP, in order to benefit BNPP.

Today's action is a follow up to the Fed's previous injunection from January 2017 in which the "regulator" permanently prohibited former BNP Paribas trader Jason Katz from participating in the banking industry for his manipulation of FX prices. Here is a blurb from Katz' admission in early Januar, courtesy of Bloomberg

Jason Katz, a former Barclays Plc currency trader, admitted conspiring to fix prices in the foreign-exchange market, the third individual to be charged and the first to plead guilty in a long-running U.S. criminal investigation into the rigging of currency rates.


Katz appeared in Manhattan federal court Wednesday, where he admitted to participating in a conspiracy with other bankers to manipulate emerging-market currency trades while working at three different financial institutions from 2007 to 2013. Separately, the Federal Reserve Board said it banned Katz from the banking industry.


Katz was released on a $150,000 bond to be secured by property in New York’s Delaware County. His travel is limited to New York, Connecticut and London until April 1 when he is to turn over his passport and remain in the U.S.

Before BNP, Katz spent a year as director of emerging markets-foreign exchange trading at Barclays beginning in 2010, according to regulatory filings and his previous LinkedIn profile; his current one has been duly scrubbed. Katz joined BNP Paribas in September 2011 as its director of emerging markets-foreign exchange trading, before leaving for Australia & New Zealand Banking Group Ltd. two years later, the documents show. Before joining Barclays, Katz spent more than nine years at Standard Bank, where he was head of foreign exchange, according to his LinkedIn profile.

While the Fed said that BNP has agreed to assist the Board of Governors in the supervision of this Order, it is becoming obvious even to lay people that as long as the Fed keeps its penalties at the "laughable" level, nothing ever will change in the FX market. Adding to the irony, today's penalty comes one day after RBA Deputy Governor Guy Debelle said in an interview with The Australian that "banks that don’t sign up to a new global code of conduct for the foreign exchange market will be barred from dealing with central banks and other signatories to the code."

"Certainly they will need to sign up within 12 months, otherwise we, as central banks, will stop dealing with them," Debelle says adding that there are positive signs that banks are already improving their behavior.

Today's settlement is hardly evidence of that.


hedgeless_horseman Mon, 07/17/2017 - 14:24 Permalink


Perhaps one day the Fed will realize that as long as its keep settling for paltry amounts that are a fraction of how much the banks make by violating the rules (and yes, participating in chat rooms), this type of behavior will never end. 

Realize it?  It is by design.

The Board of Governors of the Federal Reserve System has supervisory and regulatory authority over a wide range of financial institutions, including state-chartered banks that are members of the Federal Reserve System (state member banks), bank holding companies, thrift holding companies and foreign banking organizations that have a branch, agency, a commercial lending company subsidiary or a bank subsidiary in the United States. While the Board establishes supervisory policies, the Board delegates day-to-day supervision to the Reserve Banks.…… 3)  What is your position on the Federal Reserve Banks being responsible for regulating and supervising the very same banks that own them? 

Conflict of Interest A term used to describe the situation in which a public official or fiduciary who, contrary to the obligation and absolute duty to act for the benefit of the public or a designated individual, exploits the relationship for personal benefit, typically pecuniary. In certain relationships, individuals or the general public place their trust and confidence in someone to act in their best interests. When an individual has the responsibility to represent another person—whether as administrator, attorney, executor, government official, or trustee—a clash between professional obligations and personal interests arises if the individual tries to perform that duty while at the same time trying to achieve personal gain. The appearance of a conflict of interest is present if there is a potential for the personal interests of an individual to clash with fiduciary duties, such as when a client has his or her attorney commence an action against a company in which the attorney is the majority stockholder. Incompatibility of professional duties and personal interests has led Congress and many state legislatures to enact statutes defining conduct that constitutes a conflict of interest and specifying the sanctions for violations. A member of a profession who has been involved in a conflict of interest might be subject to disciplinary proceedings before the body that granted permission to practice that profession.
Macavity hedgeless_horseman Mon, 07/17/2017 - 14:57 Permalink

HH--you're a shining example. And so, I might share may understanding of the nature of banking reality. Both (1) fractional reserving and (2) the credit creation theory of money apply in reality. Fractional reserving applies to deposits, assets and the like. See India's push to encourage privately held gold (jewelry) into banks via the Gold Monetization Scheme. Fractional reserving is obvious in the case of gold. The credit creation theory of money applies to all other money-out-of-thin-air loans made by banks. I came across a wonderful paper aiming to settle the dispute, then applied some Hazlitt philosophy to realise multiple theories of money apply in reality. Link coming...

In reply to by hedgeless_horseman

Too-Big-to-Bail (not verified) Mon, 07/17/2017 - 14:19 Permalink

$246 million a bargain -- They definitely made ten times that employing the collusion and insider trading -- for them it's just the cost of doing business.

Greed is King Mon, 07/17/2017 - 14:27 Permalink

Seeing as the root of all financial evil resides on Wall St, am I the only ZH`er who thinks it somewhat strange that it`s always a European Bank that gets fined ?, have any American banks been fined that I`ve not heard about ?, or are the American banks as I suspect "Protected".

shizzledizzle Mon, 07/17/2017 - 14:29 Permalink

All in a days work. The FED and the ECB probably have a slush fund to cover the legal liabilities of institutions fixing PM prices. "We'll pay your fines now get back to work and try a little harder NOT to get caught."

silverer Mon, 07/17/2017 - 14:47 Permalink

Totally honest, ethical, and in the best interest of your children. Democrat approved (if democrats do it). Republican approved (if republicans do it).

Bopper09 Mon, 07/17/2017 - 17:56 Permalink

When Brady was caught cheating, he was banned from playing for 4 games.  How about ban these fucking criminals from trading for 4 months?  Or just throw them in jail, but we all know there is no law in this land.