credit suisse bank of america merrill lynch and credit agricole cartel agreement eu commission fines banks in the millions

credit suisse bank of america merrill lynch and credit agricole cartel agreement eu commission fines banks in the millions

Introduction

Credit Suisse, Bank of America Merrill Lynch, and Credit Agricole have been collectively penalized with a total fine of EUR 28 million by the European Commission. The penalty was imposed after the three financial institutions engaged in collusive behavior as a cartel in bond trading activities.

Collusion in European Second Market

The European Commission fined these banks for colluding in the European second market in their respective departments of US dollar supra-sovereign, sovereign, and agency (SSA) bonds. Traders from these banks engaged in manipulative practices, including sharing sensitive information, coordinating prices, and aligning trading strategies through chat rooms and Bloomberg Terminals for a duration of five years. This collusive behavior had a detrimental impact on the secondary market trading of US dollar SSA bonds within the European Economic Area, as stated by the Commission.

Deutsche Bank’s Involvement and Consequences

Deutsche Bank was also involved in the cartel; however, it avoided a financial penalty as it cooperated with the investigation and revealed the existence of the cartel.

Commission’s Response and Consequences

Margrethe Vestager, the executive vice president of the Commission responsible for competition policy, commented that the collusion between traders from these investment banks limited competition in a market where investment and pension funds regularly engage in bond trading on behalf of their clients. This cartel activity harmed financial markets, and the Commission’s decision sends a clear message that such collusive behavior will not be tolerated.

Penalties Imposed

Out of the total EUR 28 million fine, Bank of America Merrill Lynch received the highest penalty of EUR 12,642,000, followed by Credit Suisse with a fine of EUR 11,859,000, and Credit Agricole with a penalty of EUR 3,993,000.

Crackdown on Cartel Activity

This fine is the latest in a series of actions by the Commission to combat cartel activity within major investment banks. In 2019, Barclays, RBS, Citi, JP Morgan, and MUFG paid a combined fine of EUR 1.07 billion for their involvement in a cartel that manipulated FX spot prices for 11 currencies.

Expert Opinion: Ed Wicks on TradeTech Topics

Ahead of TradeTech, Ed Wicks, the global head of trading at Legal & General Investment Management, reflects on the most discussed topics at TradeTech Europe this year. He shares his thoughts on remote working, automation, and outsourced trading.

Adapting to Remote Trading

Legal & General Investment Management successfully coped with remote trading throughout 2020. Despite challenging conditions, the company witnessed a 20% increase in trading volume across all asset classes. This demonstrated the effectiveness of their implemented processes and the ability to sustain growth with remote working arrangements.

Future of Remote Work

Wicks highlights the importance of flexibility for traders going forward. Legal & General is currently evaluating the preferences of its staff regarding remote work and will develop a strategy based on the collected information. They recognize that different roles may require different levels of flexibility.

Technology Adoption for Remote Work

Ensuring a seamless experience between remote and in-office work environments requires investment in appropriate technology and audio-visual equipment. Legal & General acknowledges the need to equip their offices with the necessary resources to support hybrid working arrangements effectively.

Disruptive Technologies in Institutional Equities Trading

Wicks anticipates significant improvements in initial public offerings (IPOs) and secondary processes in the next few years. The buy-side is seeking better solutions for new issues in both equities and bonds. This area is ripe for innovation, and advancements would be welcomed by market participants.

Impact of Market Structure Changes on Trader Workflows

Changes to trading obligations, such as the share trading and derivatives trading obligations, which came into effect after Brexit, have had a significant impact on trading workflows. Wicks expects further changes to market structure, especially with proposals for the removal of the share trading obligation. These anticipated changes will have a more profound effect on trader workflows.

The Relationship between Automation and Execution Efficiency

Wicks emphasizes that automation can improve both efficiency and trading results. Legal & General has implemented automated operations across various areas, including pricing, foreign exchange, and equities. Additionally, automating post-trade activities can save time and enhance operational efficiency.

The Future of Outsourced Trading

Outsourced trading should be evaluated based on the scale and complexity of each individual firm’s business. Legal & General considers its global trading function to be a vital part of its investment process. The company believes that in-house expertise offers significant advantages and value to the investment proposition. However, outsourced trading may be suitable for some organizations depending on their specific circumstances.

TradeTech Panel Sessions of Interest

Wicks expresses interest in attending sessions focused on data analytics, FinTech, and diversity. He stresses the importance of cognitive diversity achieved through a diverse team and the necessity to address gender diversity challenges within trading desks more effectively. He looks forward to engaging in discussions and gaining insights at TradeTech.