Top banks refuse to accept overbroad definition of retail FX transactions in Forex market manipulation case
Major banks, including Bank of America, Citi and JPMorgan argue against the “plaintiffs’ attempt to vastly expand the scope of this case”.
A number of top banks that are defendants in a Forex benchmark rate fixing case have challenged a plaintiffs’ request to enlarge the scope of the definition of retail FX transactions. Several banks, including Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Citigroup Inc (NYSE:C), on Wednesday, March 28, 2018, filed a Letter with the New York Southern District Court, arguing that the scope of transactions to which the plaintiffs’ claims apply should not include overseas transactions using credit and debit cards.
According to the banks, the dispute arises out of “the plaintiffs’ attempt to vastly expand the scope of this case to include a wide range of transactions”. The defendants note that the complaints the plaintiffs have filed since 2015 have all asserted claims based on purchases of physical foreign currency directly from a defendant through a retail banking location in the United States. However, in a motion filed with the Court early this month, the plaintiffs contended that credit, debit, or ATM card transactions have always been a part of this case. According to the plaintiffs, the word “purchase” implicitly includes overseas transactions using credit and debit cards.
The banks argue that the plaintiffs’ request is 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. Courts consider four factors in determining whether a plaintiff is an efficient enforcer: (i) the directness of the asserted injury, which requires an analysis of the chain of causation; (ii) the existence of more direct victims of the alleged conspiracy; (iii) the extent to which damages are “highly speculative”; and (iv) the importance of avoiding either the risk of duplicative recoveries, on the one hand, or the danger of complex apportionment of damages, on the other.
According to the banks, the plaintiffs cannot satisfy the directness prong of the efficient enforcer test, and hence, they lack antitrust standing.
The banks also note that the plaintiffs do not plausibly allege a conspiracy to manipulate foreign exchange rates on credit, debit, and ATM card transactions. That is, according to the banks, because the plaintiffs fail to plead a single non-conclusory fact from which to infer that the defendants conspired with Visa and MasterCard.
Let’s recall that the parties in this case have already clashed over the way FX rates applicable to Visa and MasterCard’s credit and debit cards are determined. According to the banks, 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.”
The plaintiffs disagree with such a statement. According to them, the Visa and MasterCard rates are “selected from the range of rates available in wholesale currency markets” such as World Markets/ Reuters and European Central Bank exchange rates, (unless government-mandated rates apply), and that Issuer Banks have the final word under Visa Regulations.
Apparently, the volume of topics of disagreement between the parties is growing.
In their letter, filed with the Court on Wednesday, the banks argue that the plaintiffs’ request as to the definition of retail FX transaction should be denied as overbroad.
The case is captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300).
