Analysis: Lawsuits over forex market face uncertain future

Tue Feb 4, 2014 4:55pm EST
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By Andrew Longstreth

NEW YORK (Reuters) - As investigations into alleged manipulation of the global foreign exchange market advance, class actions against the world's biggest banks are piling up, exposing the banks to potentially billions of dollars in damages.

The lawsuits claim that the banks violated federal antitrust law when their senior traders allegedly shared sensitive market information in chat rooms to execute a variety of strategies to move key benchmark rates.

The collusion, the lawsuits allege, allowed the banks to profit at the expense of their customers.

If the plaintiffs, including some public pension funds, can prove their claims, they would be entitled to recover three times the amount of their actual damages under antitrust law.

But as a recent court decision dismissing antitrust claims over the alleged manipulation of a global interest rate suggests, success is far from guaranteed.

Even if it is proven that manipulation of a benchmark has occurred, antitrust law may not apply.

"We still have to ask whether it is something 'antitrust-bad,'" C. Scott Hemphill, a professor at Columbia Law School, told a recent New York conference for antitrust lawyers.

So far, at least eight lawsuits have been filed, naming, among others, the seven banks that allegedly control nearly 70 percent of the roughly $5.3 trillion-a-day foreign exchange market: Deutsche Bank DBKGn.DE, Citigroup C.UL, Barclays BARC.L, UBS UBSN.VX, HSBC HSBCUK.UL, JPMorgan Chase & Co JPM.N, and Royal Bank of Scotland RBSRB.UL. Those banks declined to comment or did not return messages seeking comment.   Continued...

A U.S. 100 dollar banknote is seen on top of 5 and 10 lira banknotes in this illustration picture taken in Istanbul January 28, 2014. REUTERS/Murad Sezer