Alpari (US) objects to NFA arbitration in “last look” cases against RBS, BNP Paribas, Credit Suisse

The “last look” cases brought by now-defunct Forex broker Alpari (US) against a number of major banks, including Royal Bank of Scotland Group plc (LON:RBS), BNP Paribas SA (EPA:BNP) and Credit Suisse Group AG (VTX:CSGN), continue at the New York Southern District Court.

On Thursday, January 11, 2018, the plaintiff – Alpari (US), sought to rebuff the motion to dismiss filed about a month ago by the defendants. Let’s recall that back then the defendants noted that the Court to either compel arbitration on Alpari’s complaints or to dismiss the case altogether.

The banks note that Alpari (US) was a registered member of the National Futures Association (NFA) from November 14, 2007 to April 21, 2015. As a member, they said, Alpari is bound by the NFA Member Arbitration Rules. Under those rules, the dispute between Alpari and the defendants, which are also NFA members, or principals of members, shall be arbitrated. Accordingly, the Court should compel arbitration.

In its latest filing with the Court, however, Alpari (US) noted that NFA Member arbitration is reserved solely for disputes between and among NFA Members or those who were NFA Members “at the time the acts or transactions that are the subject of the dispute occurred,” while claims between an NFA Member and an “Associate” of a Member are only subject to mandatory NFA arbitration “at the election of the person filing the claim.” Credit Suisse and RBS concede they are not NFA Members, but rather principals, and thus, according to Alpari, should be treated like “Associates” per NFA rules. Hence, the plaintiff says, they lack unilateral authority to compel arbitration of Alpari’s claims under NFA’s rules.

As for BNP Paribas (which became an NFA Member on May 7, 2013), it could only seek, at most, to compel NFA Member arbitration for Alpari (US) transactions arising after their overlapping respective dates of NFA membership.

The banks have also contended that arbitration and forum selection clauses found in Pricing and Liquidity Agreements they entered into with Alpari (US) are applicable and can be used to mandate arbitration and/or forum selection. Alpari notes that the Pricing and Liquidity Agreements expressly concern the banks’ provision of liquidity to QuantumFX, an electronic communications network for Alpari’s institutional clients (the so-called “A-Book business”).

However, the claims in this case involve the banks’ allegedly improper conduct in a separate line of business by which Alpari (US) traded directly against retail clients and then entered into hedging transactions on its own behalf with the defendants on third-party ECNs such as Currenex (the so-called “B-Book business”). According to Alpari, the defendants can point to no agreement requiring arbitration of Alpari’s B-Book business because Alpari never entered into any agreement that mandated arbitration of its B-Book claims with the defendants.

Alpari’s action seeks compensation for the victims of the defendants’ Last Look practices. All of the banks are alleged to have caused damage to Alpari (US) and other FX market participants as a result of the use of “Last Look” practices. All of the defendants are accused of breach of contracts on their proprietary trading platforms, breach of contracts on ECNs, as well as of unjust enrichment.