Picture: ISTOCK
Picture: ISTOCK

The Competition Commission on Wednesday described how the use of instant messaging chat rooms was central to the manipulation of the $51bn daily market in the US dollar-South African rand currency pair.

Twenty-three banks have been accused of acting in a cartel-like fashion contrary to competition law over a six-year period from 2007 to 2013.

The hearing under way at the Competition Tribunal was a precursor to the main event that is due to begin later in 2018.

Advocate Tembeka Ngcukaitobi, representing the commission, described how an administrator of the chat room grants access to participants — in this case, the 32 traders accused of the currency manipulation.

"The instant messages are visible to all in the chat room, whether you engage in the conversation or not, and each trader can communicate bilaterally or multilaterally. So just by joining the ‘smoke-filled chat room’ they were party to what was going on – the conspiracy."

Ngcukaitobi said posts in the chat rooms included information on past and future trades, speculation regarding the direction of the market, the bids or offers that were made and the successful trades.

They also included trading strategies, identities and positions of clients including whether they had spread their trades across institutions.

The activity in these chat rooms, similar to those provided on Reuters and Bloomberg terminals, was "a type of international cartel", he said.

Picking apart what happened in these chat rooms, who knew what and when, and who acted in concert or failed to act, will be central to determining whether this behaviour affected the efficient functioning of the currency market to the detriment of the broader economy.