Law360, New York (May 20, 2015, 8:54 PM ET) -- “If you ain’t cheating, you ain’t trying.” This isn’t just an overused and cynical sports adage, it’s one of many jaw-dropping exchanges by a group of traders who called themselves the “cartel” and teamed up to manipulate global foreign exchange markets, according to Barclays PLC's settlements with regulators.
In addition to pleading guilty to criminal antitrust violations, Barclays paid
$710 million to the U.S. Department of Justice,
$342 million to the Federal Reserve, $400 million to the U.S. Commodity Futures Trading
Commission and $485 million to New York’s Department of
Financial Services. The U.K. Financial Conduct Authority also fined the British
bank £284 million ($441.8 million) for violations of U.K. antitrust law.
In settlement documents and statements announcing those deals, regulators cited
examples of the egregious language used by forex traders at Barclays and other
banks in secret, multibank chat rooms. One invitation-only chat room, referred
to as “The Cartel” included forex traders from Citigroup Inc., JPMorgan Chase & Co., UBS AG, Royal Bank of Scotland Group
PLC and Barclays who specialized in trading the euro, according
to the NYDFS.
Here, Law360 looks at a few of the choicest conversation snippets from that
chat room and others, as cited by the CFTC and NYDFS.
As part of their scheme to manipulate the prices in certain forex currency
pairs and certain forex benchmark rates, traders would “build ammo” by amassing
a large portion of currency and then unload the “ammo” just before or during a
fix in order to move prices, according to the NYDFS.
Traders in the multibank chat often agreed to stay out of each other’s way
around the time of a fix and avoid executing contrary orders while a price was
being deployed. Traders also cooperated with price manipulation by trying to
“clear the decks” of contrary orders so as not to dilute the “ammo,” the NYDFS
In a June 2011 chat with a trader from HSBC, one Barclays trader reported that
another trader was building orders to execute at the fix, contrary to HSBC’s
orders, but Barclays helped HSBC by executing trades ahead of the fix in order
to decrease that other trader’s orders, according to NYDFS.
In a separate chat several months later, a Barclays trader told a trader from
Citigroup, “If u bigger. He will step out of the way. . . We gonna help u,”
Forex traders in the U.S. dollar/Brazilian real market colluded in a more
straightforward way, according to the New York regulator.
In an October 2009 chat, an RBC trader reportedly wrote, “everybody is in
agreement in not accepting a local player as a broker?”
A Barclays forex trader reportedly responded, “yes, the less competition the
According to the NYDFS, members of the Barclays forex sales team also routinely
misled their clients by applying so-called hard markups to the prices traders
gave them without their clients’ knowledge. These markups were a significant
revenue source for the bank and sales managers pushed their employees to use
them as much as possible, the NYDFS said.
Forex sales employees allegedly determined customer markups by calculating the
best possible rate for Barclays that wouldn’t raise any red flags with the
customer. These calculations were based on the bank’s relationship with the
customer, their recent pricing history and the clients’ expectations, according
One forex sale employee reportedly put it this way to an employee at another
bank in December 2009: “hard mark up is key . . . but i was taught early . . .
u dont have clients . . . u dont make money . . . so dont be stupid.”
When one forex sales employee admitted to a colleague in June 2009 that he had
“come clean” to a client about a hard markup, the colleague told him, “i
wouldnt normally admit to clients if you pip them. i think saying you rounded
The first employee agreed and then clarified that he didn’t really come clean,
but rather that he told the client he had rounded the amount.
In a November 2010 chat message, the future co-head of Barclays' UK forex hedge
fund sales, who was then a vice president in the New York office, wrote:
“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.”
As they colluded to fix the markets, the traders in the chat rooms kept each
other abreast of their activities, according to the CFTC.
In one chat cited by the futures market regulators, a trader from Barclays and
a trader from “Bank Y” coordinated their trading in order to manipulate a WM/R
4 p.m. London fix.
At 3:43:50, the Barclays trader reportedly asked the Bank Y trader whether he
needed to buy Euros in the market in the forthcoming fix. The Bank Y trader
told him that he had a net buy order for the fix, which he said totaled 105
million. Less than a minute later, the Bank Y trader reportedly offered to
transfer that net buy order to the Barclays trader. The Barclays trader chatted
“maybe” and said he had a net buy order for 150 million, according to the
The two traders then had the following exchange:
“Barclays trader: i'd prefer we join forces
Bank Y trader: perfick/ lets do this .../lets double team them
Barclays trader: YESssssssssssss”
Once the fixing window closed, the traders congratulated themselves, the CFTC
“Barclays trader: sml rumour we haven't lost it
Bank Y trader: we/ do/ dollarrr”
Throughout the yearslong scheme to rig the foreign exchange markets, forex
traders often had multiple chat rooms open simultaneously within their trading
terminals, according to Barclays’ settlement order with the CFTC.
Being a member of certain chat rooms, like “The Cartel,” was considered very
exclusive. When inviting new members, existing traders often discussed whether
a new addition would be in the best interests of the group first.
In one chat, traders from three other banks reportedly discussed whether to
invite a Barclays trader into a chat room:
“Bank Z trader: are we ok with keeping this as is ../ ie the info lvls &
Bank X trader: well ...
Bank Z trader: that is the qu[ estion]
Bank X trader: you know him best obv .../ if you think we need to adjust it/
then he shouldn't be in chat
Bank Y trader: yeah that is key/ simple question [Bank Z Trader]/ I trust you
implicitly [Bank Z Trader]/ and your judgement/ you know him/ will he tell rest
of desk stuff/ or god forbin his nyk ...
Bank X trader: yes/ that's really imp[ortant] q[uestion]/ dont want other
numpty' s in mkt to know/ but not only that/ is he gonna protect us/ like we
protect each other against our own branches/ ie if you guys are rhs .. and my
nyk is lhs .. ill say my nyk lhs in few”
A numpty, for those unfamiliar with the term, is a common Scottish slang word
- from Law 360 https://www.law360.com/