Traders at France’s biggest bank colluded with rivals to manipulate FX prices and benchmark rates, carried out fake trades and improperly shared details on customer orders with traders at other big banks, according to the Department of Financial Services.
The misconduct, which lasted from 2007 to 2013, involved at least a dozen BNP Paribas employees in New York and other key FX trading hubs, including London and Tokyo, all of whom have quit, been sacked or otherwise been disciplined, the DFS said.
In one example cited by the DFS on Wednesday, an unnamed trader, then located in BNP’s New York branch, organised groups of rival traders to manipulate prices and spreads in several relatively illiquid currencies, including the South African rand, Hungarian forint and Turkish lira. The sub-group trying to manipulate the price of the rand, which has the code ZAR, was called “ZAR Domination”.
According to a chat transcript cited by the DFS, the trader tried to recruit a rival into the group, telling him:
“[We] got a little cartel really brewing . . . really try and move zar . . . won’t take much to push it . . . we got like 200 bucks [$200m] of firepower . . . occasional blow up but we win.”
In Tokyo, meanwhile, one trader joined with seven other traders at rival banks to share customer information in the trading of yen, through a chatroom called “We Reign”. According to the DFS, the group developed a “codebook” of phrases designed to evade compliance, and used personal emails to distribute it.
In October 2008, one of at least 10 traders in the group discussed trading activity that occurred “right before bought vsmall usdvchf”. The term “vsmall” referred to a specific trade volume, while the letter “v” buried in the middle of the US dollar-Swiss franc currency pair identified the particular BNP client that traded.
“Please keep your lips sealed thx,” wrote the trader.
In a statement, BNP said it “deeply regrets the past misconduct which led to this settlement, which was a clear breach of the high standards on which the group operates”. It noted that the fine would be covered by existing provisions.
Other banks have faced billions of dollars of fines for allowing traders to try to influence prices in FX markets, which are among the largest and most liquid in the world. In May 2015, for example, six global banks paid the US Department of Justice a total of $5.6bn to settle allegations of rigging.
Wednesday’s fine and consent order against BNP, announced around noon in New York, was the first FX-related action by the DFS and could lead to more at other banks, according to a person familiar with the regulator’s supervisory programme.
“Participants in the foreign exchange market rely on a transparent and fair market to ensure competitive prices for their trades for all participants,” said Maria Vullo, the DFS superintendent. “Here [BNP Paribas] paid little or no attention to the supervision of its foreign exchange trading business, allowing . . . traders and others to violate New York State law over the course of many years and repeatedly abused the trust of their customers.”
Under Ms Vullo, appointed last June, the DFS has continued a tradition of vigorous enforcement set by Ben Lawsky, who ran the regulator for four years until he stepped down in 2015 to set up his own consulting firm.
BNP became one of the biggest scalps of Mr Lawsky’s tenure in June 2014, when it agreed to pay a $2.2bn fine for concealing more than $190bn in transactions for clients subject to US sanctions, including Sudan, Iran and Cuba. Total penalties for BNP came to $8.9bn, including fines by other state and federal authorities.