The European Commission has fined Rabobank €26.6 million for participating in a cartel trading Euro-denominated bonds
The Commission alleges that between 2006 and 2016 Rabobank and Deutsche Bank, through some of their traders, exchanged commercially sensitive information and coordinated their trading and pricing strategies. The products in question are Euro-denominated SSA bonds which includes supra-sovereign, foreign sovereign, and sub-sovereign/agency bonds) and government guaranteed bonds traded in the European Economic Area (‘EEA’).
“Trustworthy and well-functioning bonds trading markets are crucial not only for the national authorities issuing bonds but also for the investors buying and trading them. Today we fine Rabobank for colluding with Deutsche Bank to distort competition when trading certain Euro-denominated bonds. We will remain vigilant and committed to preserve effective competition in financial markets,” said EC commissioner, Didier Reynders, in charge of competition policy.
Oliver Blower, CEO of VoxSmart and ex Barclays trader, said, “The fine levied at Rabobank by the European Commission is the latest to hit headlines, showing that firms need to do more to improve their surveillance capabilities.”
“An increasing amount of financial jargon is used between traders across instant messaging platforms and online chat rooms, which makes it much harder for compliance teams to locate and detect suspicious behaviour. Unless a financial institution has full context into how and why a certain product was originated and traded as well as robust data capture and processing capabilities, then they will only ever have half of the story,” Blower added.
Deutsche Bank was not fined as it revealed the cartel to the Commission and therefore received full immunity, avoiding a penalty of almost €156 million.
The traders operated at Deutsche Bank’s EUR SSA desk in Frankfurt and at Rabobank’s Investment Grade Bonds desk in London. They used Bloomberg emails, instant messages and online chat rooms to exchange information concerning: prices, volumes as well as current and future trading strategies and positions; the counterparties’ identities; and their requirements for buying or selling bonds.
Traders adjusted their price levels and trading strategies based on these exchanges. This included inter alia coordination on prices to be offered and displayed on Bloomberg AllQ (all quotes for bonds) screens, which is a dealer-to-client electronic trading platform, and mutual warnings when the other bank’s indicative price on screen was considered to be too low or too high.
The fine is the latest for the SSA markets which appear to have been heavily rigged against buy-side traders in the late 2000s and 2010s.
In May 2021 eleven banks were fined in similar cases, the first of which also included Deutsche Bank escaping a fine for working with authorities and the second which caught seven banks, but was completed so late after the offences that several could not be fined, due to expiry of the statute of limitations on them.
© Markets Media Europe 2023
