UK based broker ICAP has been sent a Statement of Objection by the European Commission for suspected participation in several cartel infringements in the market for interest rate derivatives denominated in the yen currency.
A Statement of Objection is a formal step in Commission investigations into suspected violations of EU rules on restrictive business practices, and does not prejudge the final outcome of the investigation.
Interest rate derivatives are financial products which are used by banks or companies for managing the risk of interest rate fluctuations, explains the Commission. They are traded worldwide and play a key role in the global economy. They derive their value from the level of a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR) or the Tokyo Interbank Offered Rate (TIBOR) for the yen.
The Commission has concerns that ICAP may have been involved in cartels concerning yen interest rate derivatives as a facilitator. If true, this would be in violation of Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA (European Economic Area) Agreement, which prohibit anti-competitive agreements and restrictive business practices.
ICAP will have the chance to defend itself against the concerns, but if the Commission ultimately concludes that there is sufficient evidence of an infringement, it can issue a decision prohibiting the conduct and impose a fine of up to 10% of a company’s annual worldwide turnover.
In the course of its investigation the Commission has already imposed fines totalling €669,719,000 on five banks and one cash broker active in the same sector in December 2013. These six companies had admitted their involvement in cartels in the yen interest rate derivatives sector, and therefore the fines were reduced by 10%.
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This blog post is intended as a news item only – no connection between Lewis Nedas and the parties concerned is intended or implied.