Citigroup Inc. (C:US) and JPMorgan Chase & Co. (JPM:US) are putting their top London currency dealers on leave after regulators probing the manipulation of foreign-exchange rates started investigating the traders’ use of an instant-message group, three people with knowledge of the moves said.
Rohan Ramchandani, Citigroup’s head of European spot trading, was told yesterday he will be placed on leave, said one of the people who asked not to be identified because he wasn’t authorized to talk publicly. Richard Usher, JPMorgan’s chief dealer in London, went on leave two weeks ago, said another person. Both are taking leave by mutual agreement with their employers and neither has been suspended, the people said.
Standard Chartered Plc (STAN) has also placed Matt Gardiner, its assistant chief dealer in the U.K. capital, on leave, a fourth person said Oct. 29. None of the traders has been accused of any wrongdoing.
Regulators are focusing on an instant-message group the traders set up to share information about their positions and client orders over a period of at least three years, four people with knowledge of the probe said this month. The roster of banks in the group changed as the men moved firms and also included Barclays Plc (BARC), Royal Bank of Scotland Group Plc and UBS AG (UBSN), three people with knowledge of the communications said.
Investigators are weighing whether the messages amounted to attempts to manipulate the market, two people said. The five firms account for about 47 percent of the $5.3 trillion-a-day foreign-exchange market, according to a May survey by Euromoney Institutional Investor Plc. (ERM) Two other traders, who weren’t part of the conversations and who asked to not be identified because they do business with those involved, said that they and others in the market referred to the message group as “The Cartel.”
Ramchandani referred calls to Citigroup’s press office, while Usher didn’t respond to e-mails and a message left on his work telephone. Gardiner, who previously worked at Barclays and UBS and moved to London-based Standard Chartered in September, didn’t respond to a message left on his mobile telephone. Sarah Small, Jenna Ward and Aurelie Leonard, spokeswomen for RBS, UBS and Barclays declined to comment. Jennifer Zuccarelli, a JPMorgan spokeswoman, and Jeffrey French, a Citigroup spokesman, said they couldn’t comment.
RBS, Usher’s employer before he joined JPMorgan in 2010, handed over his communications to regulators after concluding that he shared too much information about his positions with counterparts at other firms, two people said.
Usher and Ramchandani were members of the Bank of England’s 27-member London Foreign Exchange Joint Standing Committee’s subgroup of chief dealers as of December, according to the central bank’s bulletin for the second quarter. The group met three times last year to discuss matters including regulatory developments and market conditions, according to the bulletin. A Bank of England spokeswoman declined to comment.
Regulators in London and Zurich are probing the foreign-exchange market after Bloomberg News reported in June that dealers in the industry said they had been front-running client orders and attempting to rig the benchmark WM/Reuters rates by colluding with counterparts and pushing through trades before and during the 60-second windows when the benchmarks are set.
The data are collected and distributed by World Markets Co., a unit of Boston-based State Street Corp. (STT:US), and Thomson Reuters Corp. Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing news and information as well as currency-trading systems.
The rates determine what many pension funds pay for their foreign exchange and are used by index providers such as FTSE Group to calculate indexes spanning multiple currencies. Index tracker funds, which buy and sell currencies at the 4 p.m. WM/Reuters rates, typically place their orders in the hour or so before the close, giving dealers a picture of their complete order book in advance of the so-called fix.
Because banks agree with clients to trade at the WM/Reuters rates, regardless of later moves, dealers are at risk of losses if the market moves against them.
Barclays and Frankfurt-based Deutsche Bank AG have said they’re cooperating with regulators probing the foreign-exchange market, while Switzerland’s UBS said Oct. 29 it’s taking measures against employees. The Zurich-based firm didn’t identify or quantify the number of employees involved, or say what actions it took.
The U.S. Justice Department opened a criminal investigation of possible manipulation of the foreign-exchange market, a person familiar with the matter said on Oct. 11.
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