London gold-fix banks accused of manipulation in U.S. lawsuit

Wed Mar 5, 2014 9:38am EST
 
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LONDON (Reuters) - The five banks involved in setting the London benchmark gold price have been accused in a lawsuit of price manipulation, a filing with a U.S. federal court in New York showed.

In the filing with the U.S. District Court in Manhattan dated March 3, New York resident Kevin Maher, who says he bought and sold gold and gold futures and options, alleged the banks overseeing the benchmark - Societe Generale (SOGN.PA: Quote), Deutsche Bank (DBKGn.DE: Quote), Barclays (BARC.L: Quote), Bank of Nova Scotia (BNS.TO: Quote) and HSBC (HSBA.L: Quote) - colluded to manipulate it.

Maher is bringing the suit as a class action, on behalf of himself and other investors who held or traded gold and gold derivatives that were settled based on the gold fix, or who held or traded COMEX gold futures or options, from 2004 to now.

In a statement, Deutsche said it believed the suit was without merit and that the bank "will vigorously defend against it".

A spokesperson for Societe Generale said: "Societe Generale appears to have been named as a defendant in these proceedings together with other members of the London Gold Market Fixing Ltd. The claims are unsubstantiated and Societe Generale will defend these proceedings."

Barclays and HSBC declined to comment, while Bank of Nova Scotia could not immediately be reached.

The suit is seeking unspecified damages.

Gold fixing happens twice a day in a teleconference between banks. At the start of each fixing, the chairman announces an opening price to the other members, who relay that to their customers and, based on orders received from them, instruct their representatives to declare themselves buyers or sellers at that price.

The price is adjusted up and down until demand and supply are matched, at which point the price is declared "fixed". The fixings are used to help determine prices globally.   Continued...

 
Logos are seen outside a branch of Barclays bank in London July 30, 2013. REUTERS/Toby Melville