No evidence of collusion in foreign exchange markets, ComCom finds

Monday 7th March 2016

The Commerce Commission has finished looking into potential collusion among New Zealand's foreign exchange traders without unearthing any evidence that would warrant enforcement.

The Wellington-based regulator launched an investigation into possible manipulation of currency markets in 2014 after a whistleblower looked to use the commission's leniency policy offering immunity to the first cartel member who comes clean, but isn't considering any further action after completing its probe, it said in an emailed statement.

“The commission’s investigation into potential collusion on foreign exchange trades in New Zealand has concluded and no further action is being considered," a spokesman said. "The investigation did not uncover any evidence that would justify enforcement action and as such the case has been closed."

The government abandoned plans to criminalise the most egregious cartel behaviour after opposition from businesses who said it would have a chilling effect on the market, and leaving New Zealand out of step with the US, UK, Canada and Australia. The reforms were stalled in Parliament for more than a year, and had been in gestation since late 2009.

The New Zealand dollar was the world’s 10th most traded currency with US$105 billion in average daily turnover in April 2013 and accounting for about 2 percent of the global US$5 trillion traded daily, according to the Bank for International Settlements. The bulk of trading in the kiwi occurs outside New Zealand.

New Zealand's investigation into currency trading came at a time when authorities around the world were cracking down on traders setting foreign exchange rates by sharing client information, and last year UBS, Citigroup, JP Morgan Chase, Barclays and Royal Bank of Scotland faced penalties of more than US$6 billion for manipulating currency markets.

The probe into foreign exchange trading followed a similar investigation into fixing the London Interbank Offered Rate, the borrowing rate between lenders known as Libor. That probe resulted in financial institutions paying some US$6 billion to settle civil and criminal claims.

Last week, the Australian Securities & Investments Commission filed civil proceedings against Melbourne-based Australia and New Zealand Banking Group over the lender's involvement in setting the bank bill swap reference rate (BBSW) between March 2010 to May 2012. ANZ rejected the claim, saying it will defend the suit.

BusinessDesk.co.nz

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