UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

In the Matter of:

HSBC Bank plc,

Respondent.

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CFTC Docket No. 15 – 07

ORDER INSTITUTING PROCEEDINGS PURSUANT TO

SECTIONS 6(c)(4)(A) AND 6(d) OF THE COMMODITY EXCHANGE ACT,

MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I.

The Commodity Futures Trading Commission (“Commission”) has reason to believe that

HSBC Bank plc (“Respondent” or “HSBC”) has violated the Commodity Exchange Act (the

“Act”) and Commission Regulations (“Regulations”). Therefore, the Commission deems it

appropriate and in the public interest that public administrative proceedings be, and hereby are,

instituted to determine whether Respondent engaged in the violations set forth herein, and to

determine whether any order shall be issued imposing remedial sanctions.

II.

In anticipation of the institution of an administrative proceeding, Respondent has

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Without admitting or denying the findings or conclusions herein, Respondent herein consents to

the entry, and acknowledges service of, this Order Instituting Proceedings Pursuant to Sections

6(c)(4)(A) and 6(d) of the Commodity Exchange Act, Making Findings, and Imposing Remedial

Sanctions (“Order”).1

 1

Respondent consents to the entry of this Order and to the use of these findings in this proceeding and in

any other proceeding brought by the Commission or to which the Commission is a party; provided, however, that

Respondent does not consent to the use of the Offer, or the findings or conclusions in this Order, as the sole basis for

any other proceeding brought by the Commission, other than in a proceeding in bankruptcy or to enforce the terms

of this Order. Nor does Respondent consent to the use of the Offer or this Order, or the findings or conclusions in

this Order consented to in the Offer, by any other party in any other proceeding. Neither the Offer nor the Order

confers any rights to any party other than the Commission and HSBC. 
2

III.

The Commission finds the following:

A. Summary

From 2009 through mid-2012 (“Relevant Period”), HSBC, by and through certain foreign

exchange desk traders (“FX traders”), at times, sought to benefit its own trading positions or

those of certain FX traders at other banks by attempting to manipulate, and aiding and abetting

other banks in their attempts to manipulate certain FX benchmark rates, principally the World

Market/Reuters Closing Spot Rates (“WM/R Rates”). 

The WM/R Rates are the most widely referenced FX benchmark rates in the United

States and globally. The WM/R Rates are used to establish the relative values of different

currencies, and reflect the rates at which one currency is exchanged for another currency. Most

of the WM/R Rates at issue here are set or fixed based on trading activity of market participants,

including HSBC and other banks, at various times throughout the day. The most widely used

WM/R Rate is set or fixed at 4 p.m. London time (“4 p.m.WM/R fix”).

FX benchmark rates, including the WM/R Rates, are used to price a variety of

transactions including foreign exchange swaps, cross currency swaps, spot transactions,

forwards, options, futures, and other financial derivative instruments. The most actively traded

currency pairs are the Euro/U.S. Dollar (EUR/USD), U.S. Dollar/Japanese Yen (USD/YEN), and

British Pound Sterling/U.S. Dollar (GBP/USD). Accordingly, the integrity of the WM/R Rates

and other FX benchmark rates is critical to the integrity of the markets in the United States and

around the world.

At times, during the Relevant Period, certain FX traders at HSBC coordinated their

trading with FX traders at other banks to attempt to manipulate certain FX benchmark rates,

including the 4 p.m. WM/R fix, to their benefit. These FX traders at HSBC and other banks used

private electronic chat rooms to communicate and plan their attempts to manipulate the FX

benchmark rates for certain currency pairs.2 Certain FX traders at HSBC regularly participated

in numerous private chat rooms. At times, in certain chat rooms, HSBC FX traders disclosed

confidential customer order information and trading positions, altered trading positions to

accommodate the interests of the collective group, and agreed on trading strategies as part of an

effort by the group to attempt to manipulate certain FX benchmark rates, in some cases

downward and in some cases upward. 

HSBC FX traders’ attempts to manipulate certain FX benchmark rates related principally

to the GBP/USD currency pair. The wrongful conduct involved primarily two traders on the

London G10 FX trading desk. This conduct occurred at times over the course of the Relevant

Period without detection by HSBC, in part, because of internal controls and supervisory failures

 2

Some FX traders involved in certain chat rooms at issue herein were responsible for managing their respective banks’ FX desks.
3

at HSBC. HSBC failed to adequately assess the risks associated with its participation in the

fixing of WM/R benchmark rates and certain other FX benchmark rates. HSBC also lacked

adequate internal controls or procedures to detect and deter possible misconduct involving

certain FX benchmark rates and failed to adequately supervise its FX traders by, among other

shortcomings, failing to have adequate controls and monitoring over the use of electronic chat

rooms. 

The Commission notes that some of this conduct occurred during the same period that

HSBC was on notice that the CFTC and other regulators were investigating attempts by certain

banks to manipulate the London Interbank Offered Rate (“LIBOR”) and other interest rate

benchmarks.

***

In accepting HSBC’s Offer, the Commission recognizes the Respondent’s significant

cooperation during the CFTC’s Division of Enforcement’s (“Division”) investigation of this

matter, which included providing important information and analysis to the Division that helped

the Division efficiently and effectively undertake its investigation. In addition, the Commission

acknowledges that HSBC initiated its own internal investigation into FX trading prior to the

Division’s investigation. The Commission also recognizes that HSBC has commenced

significant remedial action to strengthen the internal controls and policies relating to foreign

exchange benchmarks and internal and external communications by HSBC employees.

B. Respondent

HSBC Bank plc is a wholly owned subsidiary of HSBC Holdings plc (“the HSBC

group”). HSBC is a full service bank, headquartered in London, with operations in four business

segments: Retail Banking and Wealth Management; Commercial Banking; Global Banking and

Markets; and Global Private Banking. HSBC’s London G10 FX trading desk is part of the

Global FX and Commodities business, a business line within Global Banking and Markets.

C. Facts

1. The Foreign Exchange Market

The foreign exchange (“FX”) market, in which traders are able to buy, sell, exchange,

and speculate on currencies, is one of the world’s largest and most actively traded financial

markets. According to the Bank of International Settlements (“BIS”), trading in global foreign

exchange markets averaged $5.3 trillion per day in April 2013. Currencies are traded in pairs

and the transacted rate represents the rate to exchange one currency for another currency. The

U.S. Dollar is the dominant currency in the FX market. The exchange of the U.S. Dollar for

another currency accounts for an estimated 87% of global FX market activity. The most actively

traded currency pairs are the Euro/U.S. Dollar (EUR/USD), U.S. Dollar/Japanese Yen

(USD/YEN), and British Pound Sterling/U.S. Dollar (GBP/USD). Participants in the FX market

include banks, investment firms, commercial companies, central banks, hedge funds, and retail

customers. The FX market is comprised of many instruments including spot, forwards, swaps,

futures, and option contracts. 
4

2. WM/R Rates Overview

The WM/R Rates, one of the leading and most widely referenced FX benchmark rates,

are calculated multiple times daily, including at 4 p.m. London time, which is commonly referred

to as the “4 p.m. fix.”3

 For twenty-one of the most liquid currencies (the “trade currencies”), the

4 p.m. fix is based on actual trades, using bids and offers extracted from a certain electronic

trading system during a one minute window (“fix period”). WM/Reuters determines the bid and

offer rates based on the captured transacted rate and the bid-offer spread. WM/Reuters then

calculates the median of these bid and offer rates and from these medians determines a “mid

trade rate.” If there are not enough trades, WM/Reuters calculates a “mid order rate.” All orders

and transactions are weighted equally, regardless of their notional sizes.

The WM/R Rates for the other 139 less liquid currencies (the “non-trade currencies”) are

set by similar methodology. Because these currencies are less liquid, WM/Reuters relies on

indicative quotes (submissions) derived from a Reuters computer feed that solicits “indications

of interest” from market participants as part of its fixing methodology. WM/Reuters captures

independent snapshots of indicative quotes for bids and offers, and selects the median rate from

these quotes as the 4 p.m. WM/R fix.

WM/Reuters also provides fix rates for forward and non-deliverable forward contracts

using methodology similar to that used for non-trade currencies. Fix rates for forward and nondeliverable forward contracts are published using a premium or discount to the spot rate for the

relevant currency pair.

Other FX benchmark rates are also priced through the use of indicative rates. For

instance, the Russian Ruble/U.S. Dollar Emerging Markets Trade Association (“EMTA”)

benchmark rates are based on indicative rates submitted by market participants to the Chicago

Mercantile Exchange (“CME”), which takes the midpoint of submitted bid offer pairs that it

randomly selects, discards the highest and lowest midpoints, and calculates the final benchmark

rate using the mean of the remaining midpoints.

FX futures contracts are connected to FX benchmark rates. The CME Russian

Ruble/U.S. Dollar (RUB/USD) futures contract, for instance, is a cash settled futures contract for

which the final settlement rate, a component of the contract’s price, is equal to the reciprocal of

the EMTA Russian Ruble/U.S. Dollar benchmark rate. Exchange rates in many actively traded

CME FX futures contracts, including the Euro/U.S. Dollar (EUR/USD) futures, the U.S.

Dollar/Japanese Yen (USD/JPY) futures, and British Pound Sterling/U.S. Dollar (GBP/USD)

futures, track rates in spot FX markets at near parity after adjusting for the forward differential,

or adding or subtracting “forward points.” Speculative traders employ strategies that seek to

capture short-lived arbitrage opportunities between FX futures and spot contracts. Since 2012,

 3 Another important benchmark is the European Central Bank (“ECB”) rate set by the ECB at 1:15 p.m.

London time. Though less widely referenced than the WM/R Rate, the ECB Rates are also used by a wide range of

participants, specifically non-financial corporates, and are important for the non-deliverable forwards market. See

Financial Stability Board Foreign Exchange Benchmarks Final Report at 1 (September 30, 2014).
5

the CME provides clearing and other services for cash-settled Over the Counter FX Spot,

Forward, Swaps, and Non-Deliverable Forward (NDF) contracts. The contracts cover 26

currency pairs, including EUR/USD, USD/JPY, and GBP/USD, and are cash-settled based on the

4 p.m. WM/R fix.

3. HSBC Traders’ Attempts to Manipulate Foreign Exchange Market

Benchmark Rates

In late 2008, following the financial crisis, liquidity and volume in the FX market

increased as many financial institutions and other market participants sought to exchange

currencies. The increase in volume and liquidity allowed HSBC FX traders and traders at other

banks to take advantage of this trading opportunity, specifically during the FX benchmark rate

fixing periods. 

During the Relevant Period, certain FX traders on HSBC’s London G10 FX trading desk

had and/or developed relationships with certain FX traders at other banks, and they increasingly

used private chat rooms to communicate and share information with each other. Certain FX

traders at HSBC routinely participated in the chat rooms. Often, these FX traders had multiple

chat rooms open simultaneously on their trading terminals, and within a chat, the traders often

focused on a particular currency pair. Being a member of certain chat rooms was sometimes

exclusive and by invitation only.

These chat rooms were the vehicles through which certain HSBC FX traders, primarily

on the London G10 FX trading desk, and traders at other banks sought to benefit their own

trading positions by jointly attempting to manipulate certain FX benchmark rates, including the 4

p.m. WM/R fix. Certain chat room participants used code words to evade detection by their

banks’ compliance monitoring systems. 

At times, during the Relevant Period, in their attempts to manipulate certain FX

benchmark rates, principally the WM/R Rates (up or down), HSBC FX traders exchanged the

size and direction of the Bank’s net orders with FX traders at other banks and used this

information to attempt to coordinate trading strategies. The traders then used this information to

enable one or more traders to attempt to manipulate the FX benchmark rates, particularly the 4

p.m. WM/R fix, prior to and during the relevant fixing period. This conduct at HSBC involved

principally two traderson HSBC’s London G10 FX trading desk.

For example, in one of the chat rooms, if a trader determined that he had fix orders in the

opposite direction to the chat room group’s overall net fixing position as they approached the

fixing window, that trader may have transacted before the fix period with traders outside the

private chat room, a practice known by market participants as “netting off,” rather than transact

with other traders within the chat room.4 In certain cases, the goal of this trading strategy was to

maintain the volume of orders held by chat room members in the direction favored by the

 4 The Commission does not consider that the netting off of orders (or the decision not to net off) ahead of

fixes is inappropriate in all circumstances.
6

majority of the private chat room members and limit orders being executed in the opposite

direction during the fix window.

If traders in the chat room had net orders in the same direction as what they desired the

rate movement at the fix to be, then the traders would at times either (1) match off these orders

with traders outside of the chat room in an attempt to reduce the volume of orders in the opposite

direction transacted during the fix period; (2) transfer their orders to a single trader within the

chat room who could then execute a single order during the fix period; or (3) transact with

traders outside of the chat room to increase the volume traded by chat room members during the

fix window in the direction favored by the private chat room traders. At times, traders also

increased the volume traded by them at the fix in the direction favored by the chat room traders

in excess of the volume necessary to manage the risk associated with their bank’s net buy or sell

orders at the fix. At times, these actions were undertaken in order to attempt to manipulate the

benchmark rate set during the fix period.

For example, on one day during the Relevant Period, in a chat room5 in which a trader on

HSBC’s London G10 FX trading desk (“HSBC Trader”) and three traders at other banks or

investment firms participated, the traders engaged in the following series of chats:

At 2:50 pm, the HSBC trader and a trader at Bank W disclose in the chat room that they

are net sellers (“lhs”) in cable:6 

Bank W Trader 1: 2:50:21 pm: early days but im a seller

cable at fix

[. . .]

Bank S Trader: 3:11:43 pm: here also

Bank R Trader: 3:24:50 pm: u got much to do in fix [Bank

Trader W]

Bank W Trader 1: 3:25:07 pm: im seller 130 cable that it

[. . .]

Bank W Trader 1: 3:28:02 pm: hopefulyl a fe wmore get

same way and we can team

whack it

Bank R Trader: 3:28:17 pm: ill do some digging

[. . .]

Bank W Trader 1: 3:36:13 pm: im seller 170 gbp atmofix

Bank R Trader: 3:36:26 pm: we sellers of 40

 5

The communications quoted in this Order contain shorthand trader language and many typographical

errors. The shorthand and errors are explained in brackets within the quotations only when deemed necessary to

assist with understanding the discussion.

6 The GBP/USD currency pairing is routinely referred to by traders as “cable.” When a FX trader has 

orders to sell GBP, it is often referred to as being on the left-hand side or “lhs” (i.e., GBP is listed on the left hand 

side of the GBP/USD currency pair). If a FX trader references right hand side or “rhs,” it indicates that the FX 

trader is a buyer of GBP (seller of USD) (i.e., USD is listed on the right hand side of the GBP/USD currency pair). 
7

HSBC Trader: 3:38:26 pm: lhs in cable at the fix

HSBC Trader: 3:38:29 pm: good amount

As the 4 p.m. fix period closes, the participants in the chat room made the following

statements:

Bank R Trader: 4:00:35 pm: well done gents

Bank W Trader 1: 4:01:56 pm: hooray nice team work

HSBC Trader: 4:02:22 pm: nice one mate

Simultaneously, in a separate, private chat room prior to the close of the fix period,

HSBC Trader informs Bank W Trader 2 at 3:25 pm that he should buy cable at the fix. Shortly

thereafter, HSBC Trader tells Bank W Trader 2 that he has a net sell order of approximately 400

million cable at the fix, and Bank W Trader 2 says he is a seller of 150 million cable at the fix: 

HSBC Trader: 3:25:19 pm: get lumpy cable at the fix ok

Bank W Trader 2: 3:25:32 pm: ta mate

Bank W Trader 2: 3:25:35 pm: 150 here

HSBC Trader: 3:25:46 pm: 400 odd here

HSBC Trader: 3:25:50 pm: lets go

Bank W Trader 2: 3:26:00 pm: yeah baby

HSBC Trader: 3:26:03 pm: [Bank W Trader 1] is too

[. . .]

Bank W Trader 2: 3:27:00 pm: sry thats the [Bank W] flow

Bank W Trader 2: 3:27:23 pm: [Bank W Trader 1] gets 150

HSBC Trader: 3:28:26 pm: so its 150 all day wiht you

guys?

[. . .]

Bank W Trader 2: 3:36:34 p.m.: 170 here

As the 4 p.m. fix period closes, HSBC Trader and the other participants in the chat room

made the following statements:

Bank W Trader 2: 4:01:03 pm: nice job mate

HSBC Trader: 4:03:34 p.m.: haha

HSBC Trader: 4:03:40 pm: i sold a lot up there

HSBC Trader: 4:03:46 pm: and over sold by 100

HSBC Trader: 4:03:48 pm: hahaha

[. . .]

Bank W Trader 2: 4:04:06 pm: sweet nice job

[. . .]

Bank W Trader 2: 4:05:04 p.m.: bravo
8

At the same time, HSBC Trader discloses he is selling at the fix in yet another private

chat with a trader at Bank V prior to the close of the fix period, at 3:28 pm:

HSBC Trader: 3:28:45 pm: lhs in about 300 quid cable

for the fix

Bank V Trader: 3:28:54 p.m.: sweet

HSBC Trader: 3:29:42 pm: can you do some digging and

seeif anyoine is that way

Bank V Trader: 3:29:52 pm: ofcourse mate

Bank V Trader: 3:34:49 pm: im getting 83 at mom mate

HSBC Trader: 3:34:56 pm: nice

[. . .]

Bank V Trader: 3:37:38 pm: someone tells a guy here he is

getting 170 cble at fix

Bank V Trader: 3:43:28 pm: see that [HSBC Trader]

HSBC Trader: 3:43:57 pm: thx

As the 4 p.m. fix period ends, Bank V Trader and HSBC Trader continue: 

Bank V Trader: 4:00:51 pm: have that my son

Bank V Trader: 4:00:52 pm: hahga

Bank V Trader: 4:00:56 pm: v nice mate

HSBC Trader: 4:04:53 pm: that worked nice mate

Bank V Trader: 4:05:44 p.m.: big time mate.

In a fourth chat room, HSBC Trader discloses his position with traders at other banks

prior to the close of the fix period. The traders starting at 3:36 pm share information about the

size and direction of the net orders at the fix period:

Bank W Trader 2: 3:36:18 pm: see first seller now

Bank Z Trader: 3:36:48 pm: you gettingt betty7 on the

mumble still [Bank W Trader

2] ?

Bank Z Trader: 3:36:51 pm: we have nowt

Bank W Trader 2: 3:36:56 pm: yep

Bank W Trader 2: 3:36:59 pm: 170

Bank Z Trader: 3:37:05 pm: ta

Bank Z Trader: 3:37:21 pm: get it up to 60/70 then bash

the fck out of it

HSBC Trader: 3:38:26 pm: lhs in cable at the fix

HSBC Trader: 3:38:29 pm: good amount

Bank Z Trader: 3:38:35 pm: ta

[. . .]

 7 Like the term “cable”, “betty” is also a shorthand name for British Pound Sterling used by some FX

traders.
9

Bank Z Trader: 4:00:28 pm: nice work gents

While participating in the four separate chat rooms referenced above, at 3:38 pm, HSBC

Trader simultaneously commented in three additional chat rooms in which traders from Bank V,

Bank W, and Bank N also participated in, that he was “lhs in cable at the fix” and “good

amount.” 

Commencing at 3:43 pm, in another private chat, Bank W Trader 1 told HSBC Trader

that another firm, which was not a participant in the chat room, was “building” in the opposite

direction to them and would be buying at the fix. At 3:43 pm, Bank W Trader 1 then reported

that he has taken action to net off against this order, which would be in the opposite direction at

the fix than Bank W Trader 1’s and HSBC Trader’s positions:

 

Bank W Trader 1: 3:43:52 pm: right ive taken him out

 Bank W Trader 1: 3:43:58 pm: he paid me for 186

HSBC Trader: 3:44:09 pm: ok thx

Bank W Trader 1: 3:44:15 pm: so shud have giot rid of main

 buyer for u

Bank W Trader 1: 3:44:58 pm: im stilla seller of 90

Bank W Trader 1: 3:45:06 pm: gives us a chance and ive

paid a load of bro ha

Bank W Trader 1: 4:05:03 pm: yeah babyxx

Bank W Trader 1: 4:05:11 pm: [HSBC Trader] [Bank W

Trader 1] combo boom

HSBC Trader: 4:05:22 pm: loved that mate 

HSBC Trader: 4:05:26 pm: worked lovely

HSBC Trader: 4:05:34 pm: pity we couldn’t get it below

the 00

In another chat room, HSBC Trader and a different trader at Bank W discuss unloading

positions just prior to the fix period commencing at 3:54 p.m.: 

 

Bank W Trader 3: 3:54:32 pm: can u let me know when are

 down to your last tenner

HSBC Trader: 3:55:02 pm: ok

HSBC Trader: 3:55:10 pm: i’m down to my last tenner

Bank W Trader 3: 3:55:17 pm: ok ta

Bank W Trader 3: 3:55:41 pm: just sold some more

HSBC Trader: 3:55:49 pm: hahaha

Bank W Trader 3: 3:55:51 pm: hehehe

Bank W Trader 3: 4:00:57 pm: nice on[e] son

HSBC Trader : 4:03:15 pm: learnt from a good fella

Bank W Trader 3: 4:15:43 pm: there u go

Bank W Trader 3: 4:16:48 pm: go early, move it, hold it,

push it
10

HSBC Trader’s practice of communicating confidential information (i.e., size and

direction of orders) and similar information soliciting and directing banks to follow suit during

the fix period, in an effort to benefit his trading positions by jointly attempting to manipulate

benchmark exchange rates, continued on various days in 2011 and 2012 until he left HSBC in

mid-2012.

In addition to HSBC Trader, at least one other HSBC FX trader received or disseminated

information in chat rooms which involved confidential size and direction orders and used this

information to attempt to manipulate benchmark exchange rate. For example, one day during the

Relevant Period, this HSBC FX trader accumulated orders from another trader and through

brokers to sell a large volume during the fix period in order to have more influence over the

benchmark exchange rate.

4. Respondent Lacked Adequate Internal Controls

During the Relevant Period, HSBC failed to adequately assess the risks associated with

its FX traders participating in the fixing of certain FX benchmark rates. HSBC also lacked

adequate internal controls in order to prevent its FX traders from engaging in improper

communications with certain FX traders at other banks. HSBC lacked sufficient policies,

procedures, and training specifically governing participation in trading around the FX

benchmarks rates and had inadequate policies pertaining to, or insufficient oversight of, its FX

traders’ use of chat rooms or other electronic messaging.

After the Relevant Period, in December 2012, HSBC banned multi-bank chat rooms for

its FX personnel. In mid-2013, HSBC commenced an internal investigation of possible

misconduct by its FX traders relating to foreign exchange benchmarks. HSBC has undertaken

certain remedial measures to improve its internal controls.

IV.

LEGAL DISCUSSION

A. Respondent, Through the Acts of Traders, Attempted to Manipulate FX

Benchmark Rates

Together, Sections 6(c),

8 6(d), and 9(a)(2) of the Act prohibit acts of attempted

manipulation. 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012). Section 9(a)(2) of the Act makes it

unlawful for “[a]ny person to . . . attempt to manipulate the price of any commodity in interstate

commerce, or for future delivery on or subject to the rules of any registered entity . . . .” 7

U.S.C. § 13(a)(2) (2012). Sections 6(c) and 6(d) of the Act authorize the Commission to serve a

complaint and provide for the imposition of, among other things, civil monetary penalties and

cease and desist orders if the Commission “has reason to believe that any person” has attempted

 8 Section 6(c) was amended effective August 15, 2011. For conduct occurring on or after that date, the

relevant is now Section 6(c)(4)(A), 7 U.S.C. § 9(4)(A) (2012).
11

to manipulate the market price of any commodity, in interstate commerce, or otherwise is

violating or has violated any of the provisions of the Act. 7 U.S.C. §§ 9,13b (2012).

With respect to conduct on or after August 15, 2011, in addition to Sections 6(c), 6(d),

and 9(a)(2), Section 6(c)(3) of the Act prohibits the attempted manipulation of the price of any

commodity in interstate commerce. 7 U.S.C. § 9(3) (2012). Commission Regulation 180.2, 17

C.F.R. §180.2 (2014), which became effective on August 15, 2011, in relevant part, makes it

“unlawful to ... directly or indirectly to attempt to manipulate, the price of ...any commodity in

interstate commerce.” Regulation 180.2 codifies Section 6(c)(3).

Two elements are required to prove an attempted manipulation: (1) an intent to affect the

market price, and (2) an overt act in furtherance of that intent. See In re Hohenberg Bros. Co.

[1975-77 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 20,271, at 21,477 (CFTC Feb. 18,

1977); CFTC v. Bradley, 408 F. Supp. 2d 1214, 1220 (N.D. Okla. 2005). To prove the intent

element of attempted manipulation, it must be shown that HSBC FX traders “acted (or failed to

act) with the purpose or conscious object of causing or effecting a price or price trend in the

market that did not reflect the legitimate forces of supply and demand.” In re Indiana Farm

Bureau Coop. Ass’n, [1982-1984 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,796, at

27,283 (CFTC Dec. 17, 1982). “[W]hile knowledge of relevant market conditions is probative of

intent, it is not necessary to prove that the accused knew to any particular degree of certainty that

his actions would create an artificial price. It is enough to present evidence from which it may

reasonably be inferred that the accused ‘consciously desire[d] that result, whatever the likelihood

of that result happening from his conduct.’” Id. (quoting U.S. v. U.S. Gypsum Co., 438 U.S. 422,

445 (1978)). A profit motive may also be evidence of intent, although profit motive is not a

necessary element of an attempted manipulation. See In re DiPlacido [2007-2009 Transfer

Binder] Comm. Fut. L. Rep. (CCH) ¶ 30,970, at 62,484 (CFTC Nov. 5, 2008) (citing In re

Hohenberg Bros. Co., [1975-1977 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 21,478)),

aff’d, 364 Fed. Appx. 657, No. 08-5559-ag, 2009 WL 3326624 (2d Cir. 2009). It is also not

necessary that there be an actual effect on price. See CFTC v. Amaranth Advisors, L.L.C., 554 F.

Supp.2d 523, 533 (S.D.N.Y. 2008).

Here, as evidenced by the foregoing, HSBC engaged in acts of attempted manipulation in

violation of Sections 6(c), 6(d) and 9(a)(2) of the Act, 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012). 

Additionally, with respect to conduct occurring on or after August 15, 2011, HSBC engaged in

acts of attempted manipulation in violation of Section 6(c)(3), 7 U.S.C. § 9(3)(2012), and

Regulation 180.2, 17 C.F.R. § 180.2 (2014).

B. Respondent Aided and Abetted the Attempts of Traders at Other Banks to

Manipulate FX Benchmark Rates

Pursuant to Section 13(a) of the Act, liability as an aider and abettor requires proof that:

(1) the Act was violated, (2) the aider and abettor had knowledge of the wrongdoing underlying

the violation, and (3) the aider and abettor intentionally assisted the primary wrongdoer. See 7

U.S.C. § 13c(a) (2012); In re Sharokh Nikkhah, [1999-2000 Transfer Binder] Comm. Fut. L.

Rep. (CCH) ¶ 28,129, at 49,888 n.28 (CFTC May 12, 2000). Although actual knowledge of the

primary wrongdoer’s conduct is required, knowledge of the unlawfulness of such conduct is not
12

necessarily required to be demonstrated. See In re Lincolnwood Commodities, Inc., [1982-1984

Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,986, at 28,255 (CFTC Jan. 31, 1984). 

Knowing assistance can be inferred from the surrounding facts and circumstances. Id. See also

In re Buckwalter, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,995, at 37,686

(CFTC Jan. 25, 1991).

Here, as evidenced by the foregoing, FX traders at other banks attempted to manipulate

the WM/R and other FX benchmark rates in violation of Sections 6(c), 6(d), and 9(a)(2) of the

Act, 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012). Additionally, with respect to conduct occurring on

or after August 15, 2011 FX traders at other banks violated Section 6(c)(3) of the Act, 7 U.S.C. §

9(3), and Regulation 180.2, 17 C.F.R. § 180.2 (2014). As evidenced above, HSBC, through the

acts of certain of its FX traders, aided and abetted the attempts of traders at other banks to

manipulate the FX benchmark rates in violation of the Act.

C. Respondent Is Liable for the Acts of its Agents

Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B) (2012), and Regulation 1.2, 17

C.F.R. § 1.2 (2014), provide that “[t]he act, omission, or failure of any official, agent or other

person acting for any individual, association, partnership, corporation, or trust within the scope

of his employment or office shall be deemed the act, omission, or failure of such individual,

association, partnership, corporation or trust[.]” Pursuant to Section 2(a)(1)(B) of the Act and

Commission Regulation 1.2, strict liability is imposed on principals for the actions of their

agents. See, e.g., Rosenthal & Co. v. CFTC, 802 F.2d 963, 966 (7th Cir. 1986); DohmenRamirez & Wellington Advisory, Inc. v. CFTC, 837 F.2d 847, 857-58 (9th Cir. 1988).

HSBC is liable for the acts, omissions and failures of its traders who acted as its

employees and/or agents in the conduct described above. Accordingly, HSBC violated Sections

6(c), 6(d) and 9(a)(2), 7 U.S.C. §§ 9, 13b and 13(a)(2)(2012), by engaging in attempted

manipulation and aiding and abetting attempted manipulation. Additionally, with respect to

conduct occurring on or after August 15, 2011, HSBC is liable for violating Section 6(c)(3), 7

U.S.C. § 9(c)(3), 13(a)(2) (2012) and Regulation 180.2, 17 C.F.R. § 180.2 (2014), as set forth

above.

V.

FINDINGS OF VIOLATIONS

Based on the foregoing, the Commission finds that Respondent violated Sections 6(c),

6(d) and 9(a)(2) of the Act, 7 U.S.C. §§ 9, 13b and 13(a)(2) (2012), and for conduct occurring on

or after August 15, 2011, Section 6(c)(3), 7 U.S.C. § 9(3) and Regulation 180.2, 17 C.F.R. §

180.2 (2014).
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VI.

OFFER OF SETTLEMENT

Respondent, without admitting or denying the findings or conclusions herein, has

submitted the Offer in which it:

A. Acknowledges receipt of service of this Order;

B. Admits the jurisdiction of the Commission with respect to this Order only and for

any action or proceeding brought or authorized by the Commission based on

violation of or enforcement of this Order.

C. Waives:

1. the filing and service of a complaint and notice of hearing;

2. a hearing;

3. all post-hearing procedures;

4. judicial review by any court;

5. any and all objections to the participation by any member of the

Commission’s staff in the Commission’s consideration of the Offer;

6. any and all claims that it may possess under the Equal Access to Justice

Act, 5 U.S.C. § 504 (2012) and 28 U.S.C. § 2412 (2012), and/or the rules

promulgated by the Commission in conformity therewith, Part 148 of the

Commission’s Regulations, 17 C.F.R. §§ 148.1-30 (2014), relating to, or

arising from, this proceeding;

7. any and all claims that it may possess under the Small Business

Regulatory Enforcement Fairness Act of 1996, Pub. L. No. 104-121, §§

201-253, 110 Stat. 847, 857-868 (1996), as amended by Pub. L. No. 110-

28, § 8302, 121 Stat. 112, 204-205 (2007), relating to, or arising from, this

proceeding; and

8. any claims of Double Jeopardy based on the institution of this proceeding

or the entry in this proceeding of any order imposing a civil monetary

penalty or any other relief;

D. Stipulates that the record basis on which this Order is entered shall consist solely

of the findings contained in this Order to which Respondent has consented in the

Offer; and

E. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order

that:
14

1. makes findings by the Commission that Respondent violated Sections

6(c), 6(d) and 9(a)(2) of the Act, 7 U.S.C. §§ 9(c), 13b and 13(a)(2) (2012)

and for conduct occurring on or after August 15, 2011, Section 6(c)(3), 7

U.S.C. §9 and Regulation 180.2, 17 C.F.R. § 180.2 (2014);

2. orders Respondent to cease and desist from violating Sections 6(c)(3) and

9(a)(2) of the Act, 7 U.S.C. §§ 9(3) and 13(a)(2) (2012) and Regulation

180.2, 17 C.F.R. § 180.2 (2014);

3. orders Respondent to pay a civil monetary penalty in the amount of

$275,000,000 plus post-judgment interest; and

4. orders Respondent and its successors and assigns to comply with the

conditions and undertakings consented to in the Offer and as set forth in

Part VII of this Order.

F. Respondent represents that it has already undertaken certain steps intended to

make reasonable efforts to ensure the integrity of the FX markets, including the

following:

1. Strengthening mandatory training requirements for all FX employees, with

a heavy focus on appropriate trading behavior.

2. Implementing new procedures regarding the appropriate use of chat rooms

as a form of communication, including by prohibition of nearly all

participation by Investment Bank staff in multi-bank chat rooms.

3. Strengthening supervision and surveillance of FX trading desks, including

the ongoing introduction of specific trade surveillance systems and

enhancements to electronic communication monitoring.

4. HSBC introduced the Benchmark and Reference Rate Setting Policy on 26

June 2012. This policy was designed to create minimum standards for

benchmark and reference rate setting activity across the Group, including

relating to FX benchmarks.

5. In July 2012 HSBC commenced a global initiative known as the Bench

mark Rates Remediation Programme, which involved a multi-month audit

to evaluate and de-risk HSBC’s participation in all its benchmark rates

around the world. The Bank’s Remediation Programme established

Benchmark Rates Steering Committees (“BRSC”) to monitor benchmarks

and periodically audit the Bank’s participation in benchmarks going

forward. Regional BRSC's started to include FX in January 2013 and the

Global FX BRSC began meeting in April 2013. 
15

6. In November 2012, HSBC implemented mandatory, periodic training on

benchmark rate setting for all Global Markets staff, including FX.

7. In May 2013, HSBC introduced the Benchmark and Reference Review

Policy and updated the Benchmark Rate Setting Policy, including the

addition of a section on conflict management and control of information

procedures.

8. Since April 2013, HSBC’s FX BRSC has overseen the development of

tools to monitor all FX benchmark rates starting with submission-based

benchmarks and on 31 July 2014 introduced a transaction-based tool to

monitor trading activity around the WM/Reuters fixings. Sign off is

performed by Front Office Supervisors with the results monitored by

Product Control and reviewed in the monthly BRSC. Any concerns

regarding unusual activity relating to the fixing are required to be

escalated as appropriate, including potentially to Legal and executive

management of HSBC. 

9. The FX BRSC also established independent product control monitoring

for FX transaction-referenced and submission-based benchmarks, to,

among other things, detect and deter trading or other conduct potentially

intended to manipulate directly or indirectly FX benchmark rates. Sign off

is performed by Front Office Supervisors with the results monitored by

Product Control and reviewed in the monthly BRSC. Any concerns

regarding unusual activity relating to the fixing are required to be

escalated as appropriate, including potentially to Legal and executive

management of HSBC. 

10. Since December 2012, HSBC has instituted a multitude of measures to

address chat room use. 

11. Since November 2011, HSBC has utilized an automated electronic

surveillance tool to monitor electronic communications, including those of

its FX traders. HSBC continuously assesses the reliability of that system

in light of on-going market events, including, among other things, 

updating the system to detect improper communications concerning FX

benchmark rates.

12. In December 2012, HSBC banned the use of multi-bank chat rooms by its

employees in the Global Markets business.

13. In 2013, HSBC Compliance and Global FX management gave FX staff

further training on inappropriate communications and e-communication

standards designed, in part, to deter improper communications concerning

FX benchmark rates. Around the same time, HSBC also provided FX
16

management with additional training related to supervision, including

supervision of benchmark related trading activity. 

14. In January 2014, HSBC issued detailed Global Markets Communications

Guidelines that covered chat room use by traders, including FX traders.

15. HSBC now provides front office supervisors samples of electronic

communications to review.

16. HSBC has and will continue to periodically review compliance with the

chat room policy.

Upon consideration, the Commission has determined to accept the Offer.

VII.

ORDER

Accordingly, IT IS HEREBY ORDERED THAT:

A. Respondent shall cease and desist from violating Sections 6(c)(3) and 9(a)(2) of the Act,

7 U.S.C. §§ 9(3) and 13(a)(2) (2012) of the Act and Regulation 180.2, 17 C.F.R. § 180.2

(2014).

B. Respondent shall pay a civil monetary penalty of $275 Million Dollars ($275,000,000),

within ten (10) days of the date of entry of this Order (the “CMP Obligation”). If the

CMP Obligation is not paid in full within ten (10) days of the date of entry of this Order,

then post judgment interest shall accrue on the CMP Obligation beginning on the date of

entry of this Order and shall be determined by using the Treasury Bill rate prevailing on

the date of entry of this Order pursuant to 28 U.S.C. § 1961 (2012). Respondent shall

pay the CMP Obligation by electronic funds transfer, U.S. postal money order, certified

check, bank cashier’s check, or bank money order. If payment is to be made other than

by electronic funds transfer, then the payment shall be made payable to the Commodity

Futures Trading Commission and sent to the address below:

Commodity Futures Trading Commission

Division of Enforcement

ATTN: Accounts Receivables --- AMZ 340

E-mail Box: 9-AMC-AMZ-AR-CFTC

DOT/FAA/MMAC

6500 S. MacArthur Blvd.

Oklahoma City, OK 73169

Telephone: (405) 954-7262
17

If payment is to be made by electronic funds transfer, Respondent shall contact Nikki

Gibson or her successor at the above address to receive payment instructions and shall

fully comply with those instructions. Respondent shall accompany payment of the CMP

Obligation with a cover letter that identifies the Respondent and the name and docket

number of this proceeding. The Respondent shall simultaneously transmit copies of the

cover letter and the form of payment to the Chief Financial Officer, Commodity Futures

Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C.

20581.

C. Respondent and its successors and assigns shall comply with the following undertakings

set forth in the Offer. 

1. REMEDIATION

As set forth above in Section VI, paragraph F, Respondent represents that

it has already undertaken and continues to undertake extensive remedial measures

to implement and strengthen its internal controls and procedures relating to its

participation in the fixing of FX benchmark rates and related supervision of its FX

traders. With respect to its remediation efforts to the extent not already

undertaken, Respondent undertakes that:

a. Respondent will implement and improve its internal controls and procedures

in a manner reasonably designed to ensure the integrity of its participation in

the fixing of any FX benchmark rate, including measures to identify and

address internal or external conflicts of interest;

b. Its remediation improvements will include internal controls and procedures

relating to:

▪ measures designed to enhance the detection and deterrence of

improper communications concerning FX benchmark rates, including

the form and manner in which communications may occur;

▪ monitoring systems designed to enhance the detection and deterrence

of trading or other conduct potentially intended to manipulate directly

or indirectly FX benchmark rates;

▪ periodic audits, at least annually, of Respondent’s participation in the

fixing of any FX benchmark rate;

▪ supervision of trading desks that participate in the fixing of any FX

benchmark rate;

▪ routine and on-going training of all traders, supervisors and others who

are involved in the fixing of any FX benchmark rate;
18

▪ processes for the periodic but routine review of written and oral

communications of any traders, supervisors and others who are

involved in the fixing of any FX benchmark rate with the review being

documented and documentation being maintained for a period of three

years; and

 continue to implement its system for reporting, handling and

investigating any suspected misconduct or questionable, unusual or

unlawful activity relating to the fixing of any FX benchmark rate with

escalation to compliance and legal and with reporting of material

matters to the executive management of HSBC, the Commission and

other appropriate regulators; the Respondent shall maintain the record

basis of the handling of each such matter for a period of three years.

c. Within 120 days of the entry of this Order, the Respondent shall make a report

to the Commission, through the Division, concerning its remediation efforts,

prior to and since the entry of this Order. Within 365 days of entry of this

Order, Respondent shall submit a report to the Commission, through the

Division, explaining how it has complied with the undertakings set forth

herein. The report shall contain a certification from a representative of the

Respondent’s Executive Management, after consultation with the

Respondent’s chief compliance officer(s), that Respondent has complied with

the undertakings set-forth above, and that it has established policies,

procedures, and controls to satisfy the undertakings set-forth in the Order.

2. COOPERATION WITH THE COMMISSION

In this action, and in any investigation or other action instituted by the

Commission, related to the subject matter of this action, Respondent shall

cooperate fully and expeditiously with the Commission, including the Division,

As part of such cooperation, Respondent agrees to the following for a period of

three (3) years from the date of the entry of this Order, or until all related

investigations and litigations in which the Commission, including the Division, is

a party, are concluded, including through the appellate review process, whichever

period is longer:

1. Preserve all records relating to the subject matter of this

proceeding, including, but not limited to, audio files, electronic

mail, other documented communications, and trading records;

2. Comply fully, promptly, completely, and truthfully with all

inquiries and requests for non-privileged information or

documents;

3. Provide authentication of documents and other evidentiary

material;
19

4. Provide copies of non-privileged documents within HSBC’s

possession, custody or control;

5. Subject to applicable laws and regulations, HSBC will make its

best efforts to produce any current (as of the time of the

request) officer, director, employee, or agent of HSBC,

regardless of the individual’s location, and at such location that

minimizes Commission travel expenditures, to provide

assistance at any trial, proceeding, or Commission

investigation related to the subject matter of this proceeding,

including, but not limited to, requests for testimony,

depositions, and/or interviews, and to encourage them to testify

completely and truthfully in any such proceeding, trial, or

investigation; and

6. Subject to applicable laws and regulations, HSBC will make its

best efforts to assist in locating and contacting any prior (as of

the time of the request) officer, director, employee or agent of

HSBC.

Respondent also agrees that it will not undertake any act that would limit

its ability to cooperate fully with the Commission. HSBC will designate an agent

located in the United States of America to receive all requests for information

pursuant to these Undertakings, and shall provide notice regarding the identity of

such Agent to the Division upon entry of this Order. Should HSBC seek to

change the designated agent to receive such requests, notice of such intention

shall be given to the Division fourteen (14) days before it occurs. Any person

designated to receive such request shall be located in the United States of

America.

3. PROHIBITED OR CONFLICTING UNDERTAKINGS

Should the Undertakings herein be prohibited by, or be contrary to the

provisions of any obligations imposed on Respondent by any presently existing,

or hereinafter enacted or promulgated laws, regulations, regulatory mandates, or

the rules or definitions issued by a Benchmark Publisher, then Respondent shall

promptly transmit notice to the Commission (through the Division) of such

prohibition or conflict, and shall meet and confer in good faith with the

Commission (through the Division) to reach an agreement regarding possible

modifications to the Undertakings herein sufficient to resolve such inconsistent

obligations. In the interim, Respondent will abide by the obligations imposed by

the law, regulations, regulatory mandates and Benchmark Publishers’ rules and

definitions. Nothing in these Undertakings shall limit, restrict or narrow any

obligations pursuant to the Act or the Commission’s Regulations promulgated