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From Antitrust Law Daily, October 23, 2015

Barclays, HSBC, nine other banks to pay $2B to settle forex market price manipulation claims

By Linda O’Brien, J.D., LL.M.

Barclays Bank, HSBC, and nine other major banks have reached a settlement in an antitrust lawsuit in which investors alleged collusion among the banks to manipulate prices on the foreign exchange (FX) market, according to a motion for preliminary approval of settlement agreements filed in the federal district court of New York City (In re Foreign Exchange Benchmark Rates Antitrust Litigation, October 22, 2015).

According to a complaint filed in 2013, traders at the banks colluded to manipulate the global standard WM/Reuters Rates for determining exchange rates for different currencies, resulting in profit for the banks at the expense of their clients. The WM/Reuters Rates serve as a benchmark settlement price for trading in 158 currencies, and are employed extensively in the operation of financial markets for uses such as valuing portfolios and funds that track global indexes and as a benchmark for currencies in contracts.

Traders at the banks allegedly traded ahead of large client orders that were believed to move the market, thus permitting the banks to profit or avoid losses. The traders allegedly would manipulate the rates by pushing through a high number of low-volume trades in the one-minute period before the WM/Reuters Rates were calculated, a process known as “banging the close.” These trades could artificially increase or decrease an exchange rate by hundredths of a percent, and could result in an approximately 100 basis point deviation from the day’s exchange rate.

In November 2014, the Commodity Futures Trading Commission imposed fines on five banks ranging from $275 million to $310 million each for trying to manipulate the global FX benchmark rates to benefit the positions of certain traders.

Barclays, HSBC, Bank of America, BNP Paribas, Citigroup, Goldman Sachs, JPMorgan, RBS, and UBS have entered in proposed settlements providing for a combined settlement of $2 billion. The plaintiffs moved for preliminary approval of the settlements with the nine banks, leaving seven non-settling defendants to continue the litigation. The settling banks have also agreed to cooperate in the prosecution of the action.

According to the memorandum in support of the plaintiffs’ motion, the proposed settlement agreements are procedurally fair and reasonable. The settlements were the product of arm’s-length negotiations between experienced and knowledgeable counsel.

Additionally, the settlements were fair, reasonable, and adequate in light of the (1) complexity, expense, and likely during of the litigation; (2) amount of discovery completed to gauge the strengths and weaknesses of the claims; (3) risks of establishing liability and damages; (4) ability of the defendants to withstand a greater judgment; and (5) reasonableness of the settlement fund in light of the best possible recovery and risks of litigation.

The settlement classes satisfy the requirements of Federal Rule of Civil Procedure 23(a) and (b). The classes are so numerous that joinder is impracticable, the action involves questions of law and fact common to the class, the claims of the named plaintiffs are typical of the claims of the class, and the named plaintiffs will fairly and adequately represent the interests of the class.

Furthermore, common questions of proof predominate over individual questions, and a class action is superior to other available methods for the efficient adjudication of the case.

The plaintiffs request certification of two classes for the purposes of settlement: (1) all persons who, between January 1, 2003 and the date of the preliminary approval order, entered into an FX instrument directly with a defendant and (2) all persons who, between January 1, 2003 and the date of the preliminary approval order, entered into an FX instrument on a U.S. exchange.

Finally, the plaintiffs propose to file a separate motion for approval of the plan of distribution and the form and manner of notice of the settlement agreements.

The case is No. 1:13-cv-07789-LGS.

Attorneys: Christopher M. Burke (Scott + Scott LLP) for Haverhill Retirement System and State-Boston Retirement System. Andrew J. Entwistle (Entwistle & Cappucci LLP) for Value Recovery Fund LLC and Augustus International Master Fund, L.P. Angela L. Baglanzis (Obermayer Rebmann Maxwell & Hippel LLP) for The City of Philadelphia, Board of Pensions and Retirement. David Harold Braff (Sullivan and Cromwell, LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling, LLP) for Citigroup, Inc. David George Januszewski (Cahill Gordon & Reindel LLP) for Credit Suisse Group AG. Joseph Serino, Jr. (Kirkland & Ellis LLP) for Deutsche Bank AG. Peter Edward Greene (Skadden, Arps, Slate, Meagher & Flom LLP) for JPMorgan Chase & Co.

Companies: Haverhill Retirement System; State-Boston Retirement System; Value Recovery Fund LLC; Augustus International Master Fund, L.P.; Barclays Bank PLC; Citigroup, Inc.; Credit Suisse Group AG; Deutsche Bank AG; JPMorgan Chase & Co.; The City of Philadelphia, Board of Pensions and Retirement

MainStory: TopStory Antitrust NewYorkNews

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