European regulators have opened a preliminary cartel investigation into possible manipulation of the $1.5tn government-sponsored bond market,
European regulators have opened a preliminary cartel investigation into possible manipulation of the $1.5tn government-sponsored bond market, in the latest effort to root out rigging involving financial traders.
The inquiry comes amid revelations that the US Department of Justice and the UK’s Financial Conduct Authority are also investigating the market.
The investigations are part of a campaign by antitrust regulators to root out collusion in financial markets after revelations that groups of traders worked together to manipulate Libor, a key rate that underpins the price of loans around the world. Further allegations followed that traders colluded to rig foreign exchange markets.
The European Commission’s competition department has sent questionnaires to a number of market participants as part of an early-stage probe into possible manipulation of the price of supranational, subsovereign and agency debt, known as the SSA market.
This market’s debt issuers include organisations such as the European Bank for Reconstruction and Development and regional borrowers such as Germany’s Länder. A common feature is that the bonds often have a form of implicit or explicit state guarantee.
Banks and interdealer brokers have so far been fined about $20bn by authorities around the world in response to the Libor and foreign exchange rate scandals which saw over a dozen leading financial institutions investigated by antitrust authorities. The findings led to criminal prosecutions of individual traders and spurred investigations into other markets, such as derivatives trading.
The Financial Times reported last month that Crédit Agricole, Nomura and Credit Suisse were among a number of banks investigated by the DoJ as part of its investigation into possible manipulation of SSA markets.
London-based traders at these three banks, in addition to a trader at Bank of America, are on leave in response to the DoJ investigations, according to people familiar with the matter.
The questionnaires will help Margrethe Vestager, the commission’s competition chief, decide whether there are grounds to launch a formal probe.
Complex cartel cases typically take a minimum of four years to complete and are usually based on evidence from tip-offs provided by whistleblowers. The commission declined to comment.
