FX benchmark rate fixing case sees dispute about foreign currency retail transactions deepen

Maria Nikolova

The plaintiffs in a case targeting top banks such as JPMorgan, Citi and Barclays, push for reconsideration of the interpretation of “foreign currency retail transactions”.

A Forex benchmark rate fixing case targeting top banks like JPMorgan Chase & Co. (NYSE:JPM), JPMorgan Chase Bank, N.A., Barclays Capital, Inc., Citibank, N.A., Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), Bank of America, N.A, HSBC Bank USA, N.A., and HSBC North America Holdings, Inc., is now focusing on the definition of “foreign currency retail transactions”.

Let’s recall that the plaintiffs in the case, captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300), have asked to change the definition of “foreign currency retail transactions” in a way that makes the term wider, vastly expanding the scope of this case to include a wide range of transactions that do not involve the purchase of physical currency in the United States. The plaintiffs want the credit, debit, or ATM card transactions outside of the United States to be included in the definition too.

The banks have objected to this “overbroad and unsupported characterization” and the New York Southern District Court has agreed with them.

Among the reasons for the Court’s decision is that the plaintiffs consistently told the Court and the Northern District of California that plaintiffs are consumers and businesses who purchased physical foreign currency at the banks’ retail branches in the United States. There was no mention of ATMs, credit and debit card transactions.

The plaintiffs’ claims were also dubbed as futile because users of credit, debit, and ATM cards outside the United States are not efficient enforcers of the antitrust laws with respect to alleged manipulation in the FX spot markets.

In addition, the banks note that Visa and MasterCard set the FX rates for credit, debit, and ATM card transactions. Thus, business decisions of independent actors (here, Visa and MasterCard) break the chain of causation between the banks’ alleged manipulation of FX spot market benchmark rates and the alleged injury in credit, debit, and ATM card transactions. Because the plaintiffs cannot satisfy the directness prong of the efficient enforcer test, they lack antitrust standing.

Finally, the banks stress that the plaintiffs’ claims concern wire transfers but they do not allege that any named plaintiff engaged in wire transfers. Furthermore, the complaint does not include wire transfers in the putative class definition and does not allege any connection between benchmark rates and wire transfers.

The plaintiffs disagree with the Court’s siding with the banks. On Tuesday, June 26, 2018, the plaintiffs asked the Court for reconsideration of its decision.

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