Court annuls €33.6m fine imposed on HSBC for distortion of competition in interest rate derivatives sector

Maria Nikolova

The General Court of the European Union annulled a fine imposed on HSBC group for anticompetitive practices in the interest rate derivatives sector.

The General Court of the European Union has annulled a hefty fine imposed by the European Commission on HSBC for for anticompetitive practices in the interest rate derivatives sector. This becomes clear from an announcement published by the Court earlier today.

The case concerns HSBC Holdings, the parent company of HSBC France, which owns HSBC Bank. HSBC France and HSBC Bank are responsible for the negotiation of Euro Interest Rate Derivatives (EIRDs). HSBC France is responsible for submitting rates to the Euribor (Euro Interbank Offered Rate) panel.

In June 2011, the Barclays banking group made an application to the European Commission to benefit from the Commission Notice on Immunity from fines and reduction of fines in cartel cases, informing it of the existence of a cartel in the EIRD sector and expressing its wish to cooperate. On October 14, 2011, Barclays was granted conditional immunity.

Following examinations conducted at the premises of a number of financial institutions in London and Paris, including those of HSBC, the European Commission launched infringement proceedings against certain financial institutions, including HSBC.

According to a decision dated December 7, 2016, the Commission found that Crédit Agricole, HSBC and JPMorgan Chase participated in a single and continuous infringement consisting of the restriction and/or distortion of competition in the EIRD sector. Due to that infringement, the Eurppean Commission imposed a fine of €33,606,000 on HSBC.

Under today’s judgment, the Court largely upholds the Commission’s finding that HSBC participated in an infringement of competition law. However, it annuls the fine imposed for insufficient reasoning.

The Court has looked into HSBC’s arguments contesting the Commission’s finding of infringement by object. In that regard, the Court concludes that the Commission was right to find that the manipulation of March 19, 2007 in which HSBC participated fell within the definition of an infringement by object. By contrast, the Court holds that the Commission’s finding concerning two discussions in which the HSBC traders had exchanged information on their trading positions with traders from other establishments was incorrect.

Further, the Court considered the pleas contesting the Commission’s finding concerning HSBC’s participation in a single and continuous infringement jointly with other establishments. In the light of the circumstances in the present case, the Court concludes that HSBC’s participation in such an infringement could be upheld only in respect, first, of its own conduct in that infringement and, second, of the conduct of other establishments forming part of the manipulation of March 19, 2007 and any potential repeat of that manipulation.

Finally, regarding the fine imposed, HSBC contests, inter alia, the reasoning for determining the value of the sales used as the basis for calculating the fine.

The Court stresses that since the Commission decided to determine that value by using a figures- based model, taking as its starting point all the cash flows received under EIRDs, the reduction factor which it applied to it plays an essential role. It is necessary that the undertakings concerned be placed in a position to understand how the European Commission arrived at a reduction factor set precisely at 98.849% and that the Court be in a position to carry out an in-depth review of that factor of the contested decision.

According to the Court, the Commission did not provide in its decision a sufficient explanation of the reasons why the reduction factor was set at that precise level, and therefore it is unable to conduct its review on a factor of the decision which could have had a significant effect on the fine imposed on HSBC. That is why the Court annuls the fine for insufficient reasoning.

Read this next

Digital Assets

Top exec at BitMEX pled guilty US Bank Act violations, pays $150K fine

BitMEX’s head of business development, Gregory Dwyer pled guilty to violating the US Bank Secrecy Act (BSA) and allowing customers to use the platform to circumvent the federal anti-money laundering rules.

Retail FX

CySEC slaps €150,000 fine on FXBFI, operator of 101investing brand

The Cyprus Securities and Exchange Commission (CySEC) today announced that it has reached a settlement with FXBFI Broker Financial Invest Ltd, trading as 101investing, ordering the firm to pay €150,000 for violating the Investment Services and Activities and Regulated Markets Law.

Retail FX

X Open Hub expands multi-asset offering with new cryptocurrencies and indices

X Open Hub, a multi-asset liquidity provider, announced today that it has extended its offering with inclusion of 30 new cryptocurrencies and two emerging market indices.

Retail FX

Interactive Brokers now offers 24/7 access to crypto trading

Interactive Brokers Group, Inc. (NASDAQ: IBKR) has widened access to cryptocurrency trading for its clients. Specifically, the discount broker extended trading hours for its cryptocurrency products to be traded 24/7, including on the weekends.

Inside View

Natural Language Generation for Multi-Language Social Media Strategies 

Natural Language Generation (NLG) is a crucial growth area in the digital landscape, with the unique potential to be used across multiple industries.

Market News, Technology

The B2Core Android App is Now Available For Download

The first version of the B2Core Android app is available for download, and it has many beneficial features for users.

Digital Assets

XBO taps custodian Fireblocks ahead of crypto exchange’s launch has integrated with digital asset and crypto technology platform Fireblocks ahead of the crypto exchange’s upcoming launch.

Industry News

Appital raises another £1.7m after integrating with FactSet, FlexTrade, and TS Imagine

“Appital has a proven track record in securing partnerships with major EMS providers, executing brokers and a trading venue to address the lack of efficiency and control over existing bookbuilding and deal distribution processes.”

Digital Assets

Tim Draper backs crypto-focused asset manager OSD in seed round

“The Old Street Digital team is well-positioned to provide access to a range of research-backed, crypto-based investment funds, and we at Draper Associates are excited to support them.”