Debate around retail Forex transactions in FX benchmark rate fixing case continues

The argument about the definition of retail Forex transactions that forms part of an FX benchmark rate fixing case captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300) has escalated. On Wednesday, March 7, 2018, the plaintiffs in the case that targets some of the world’s major banks like JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), and HSBC, moved the New York Southern District Court to file an amended complaint including their stance on the definition of “foreign currency retail transactions”.

Let’s recall that this action is brought on behalf of a putative class of consumers and end-user businesses alleging that they paid inflated foreign currency exchange rates caused by an alleged conspiracy among the defendant banks to fix prices of FX benchmark rates in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. sec. 1 et seq.

The plaintiffs now seek to affirm that the term “foreign currency retail transactions” includes credit and debit card transactions and ATM cash withdrawals abroad on cards issued by and billed by the defendant banks to the plaintiff customers’ address in the United States.

According to the plaintiffs, this stance is confirmed by three factors:

• (1) The credit and debit and ATM cards issued to the plaintiffs by the defendants, and billed to Plaintiffs at their addresses in the United States, use wholesale benchmark exchange rates, such as the World Markets/Reuters and European Central Bank (ECB) rates, allegedly manipulated by Defendants, selected by Visa and MasterCard as Defendants’ agents ad co-conspirators in currency conversions for credit and debit card transactions and cash withdrawals abroad as provided in Visa International Regulations and MasterCard Rules, both of which apply wholesale exchange rates to foreign currency retail transactions.
• (2) In addition, the plaintiffs refer to an analysis by an expert, Carl S. Saba, MBA, CVA comparing the ECB FX benchmark exchange rates with the wholesale exchange rates available on Visa’s online “Currency Converter” and MasterCard’s online “Currency Converter”. The analysis, the plaintiffs note, demonstrates a direct correlation between the ECB FX benchmark exchange rates and the wholesale exchange rates derived from Visa’s online “Currency Converter” and MasterCard’s online “Currency Converter” involving variances for the large majority of days of less than one per cent (1%) for each.

The plaintiffs note that given that the currency conversion rate for the credit, debit and ATM cards issued by the defendant banks is derived from “rates available in wholesale currency markets” as set forth in the Visa International Regulations or “a wholesale exchange rate” as set forth in the MasterCard Rules, and there is a strong correlation between the Visa and MasterCard currency exchange rates and the ECB Fix Rate that Defendants allegedly manipulated, it is plausible that the banks’ manipulation of the wholesale benchmark exchange rates had a direct impact on the exchange rates that the plaintiffs paid on their credit, debit, and ATM cards. Also, this is said to mean that the plaintiffs plausibly participated in a market where competition was restrained.

• (3) Also, according to the plaintiffs, the defendant banks’ promoting to consumers and business end-users the use of the credit, debit and ATM cards issued by the banks for transactions involving currency conversion and ATM cash withdrawals in foreign currency abroad, confirmed that credit and debit card transactions and ATM cash withdrawals abroad are included within “foreign currency retail transactions.”

According to the banks that are defendants in this case, publicly available information indicates that the card networks (e.g., Visa and MasterCard) generally set the foreign exchange rate when a card is used abroad. The banks note that Bank of America’s website includes a Foreign Exchange Rate FAQs page, which states that “the exchange rate for international purchases and foreign ATM transactions is set by Visa or MasterCard, depending on your card’s logo.”