EDITORIAL: Wisdom brought to bear in forex wars
Another twist in the two-year wrangle over claims that traders at some of SA’s big banks were involved in rigging the currency suggests true accountability is still some way off
Another twist in the two-year wrangle over claims that traders at some of SA’s big banks were involved in rigging the currency suggests true accountability is still some way off. The case began when the Competition Commission said it planned to prosecute 18 banks for conspiring to rig the rand. Since then, the banks have sought to torpedo the commission’s case, claiming it was "vague and embarrassing", while the foreign banks have tried to wriggle out by claiming the local authorities have no jurisdiction over them.
In a display of Solomon-like wisdom, the Competition Tribunal last week delivered a ruling that gave none of the parties involved — neither the banks, nor the Competition Commission — what they asked for, but enabled many to claim victory.
"The tribunal has upheld Standard Bank’s exception and ordered the commission to restate its case within 40 days and with sufficient particularity to enable Standard Bank to know what it is," said Standard Bank’s spokesperson Ross Linstrom. Investec too said it "awaits receipt of the commission’s new referral affidavit".
And the commission, whose case was criticised for being vexatious and unreasonable, also seemed happy with the tribunal’s ruling. "This important step takes us closer to the banks responding and attending to the merits of the case," said spokesperson Sipho Ngwema.
Not even the foreign banks got what they asked for, which was to be let off scot-free.
Of course the tribunal’s 76-page ruling doesn’t have Solomon’s air of simplicity. Hardly surprising, given that Solomon never had to deal with Bloomberg chat rooms and people with intriguing names like ZARdomination. He did not have to consider jurisdictional issues, track complex trades in currency derivatives or deal with the pharaoh-like bombastic authority of the banks.
The word "arcane" might have been invented to describe currency trading — understood by few, mysterious or secret. Despite this, or because of it, currency-related products underpin a $5.1-trillion-a-day market in which most of the world’s biggest banks are deeply involved. Trading in foreign exchange markets swamps the level of trade in goods and commercial services, now standing at a meagre $15-trillion a year.
Remarkably, the SA Competition Commission could be on track to becoming the first competition authority in the world to prosecute forex charges in court. It’s not that authorities in other countries haven’t gone after forex manipulators — it’s just that they’ve typically reached settlements or issued administrative decisions. Since 2013 alleged wrongdoers at the banks have stumped up more than $10bn in penalties for this.
But if the commission is to have any hope of ensuring its "vague and embarrassing" case proceeds, it will need to panelbeat its allegations into a form that won’t be rejected by the tribunal.
The "peregreni" — firms that are neither domiciled nor carry on business in SA — haven’t been allowed to dodge responsibility either.
Tribunal chair Norman Manoim said that even if the commission could not enforce a judgment on foreign banks, the door should still be left open for them to be declared in violation of SA law.
"It is still a matter of public interest in fighting the scourge of cartels, to pronounce upon the conduct of foreign firms whose conduct has harmed SA consumers," said Manoim.
It’ll be a long and winding road. But at least it means the banks will have to account for the substance of the claims, rather than dodging accountability on hyper-technical arguments.