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Screenshot of a breaking news alert e-mail from Q2 2017
The Competition Commissioner of South Africa has officially announced they have initiated an investigation against BNP Paribas, BNP Paribas South Africa, Citigroup Inc., Citigroup Global Markets (Pty) Ltd, Barclays Bank Plc, Barclays Africa Group Ltd, JP Morgan Chase & Co, JP Morgan South Africa, Investec Ltd, Standard New York Securities Inc. and Standard Chartered Bank, (Respondents).
The Respondents who are traders in foreign currencies have allegedly been directly or indirectly fixing prices in relation to bids, offers and bid-offer spreads in respect of spot, futures and forwards currency trades in contravention of section 4(1)(b)(i) of the Competition Act no. 89 of 1998, as amended.
The foreign currency exchange market consists of buyers, sellers and traders who interact by exchanging one currency for another. A spot transaction is a trade that is settled two business days from the transaction date, or at a standard settlement date. A forwards transaction occurs where the exchange rate is agreed in advance and the transaction is settled at a future date. A futures transaction is similar to a forwards transaction but takes place on a registered exchange that gives a participant the right to buy or sell an underlying currency at a fixed exchange rate at a specified date in the future.
The alleged collusion the “ZAR domination” was carried out through electronic messaging platforms used for currency trading, which enabled the Respondents to coordinate their trading activities when quoting customers who buy or sell currencies. This coordination has the effect of eliminating competition among the Respondents, as it enabled them to charge an agreed price for a specific amount of currency.
This anti-competitive behaviour is not unique to transactions involving the South African rand. The Commission’s investigation follows similar investigations launched by other competition authorities in other jurisdictions.
“Conduct of this nature distorts the price of foreign exchange and artificially inflates the cost of trading in foreign currency paired with the South African rand. Indications are that this conduct was prevalent offshore, but with this investigation we are sending a clear message that we will pursue cartels affecting South Africa wherever they take place” says the Competition Commissioner, Tembinkosi Bonakele.
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