Citigroup Inc. (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM) are just two of the leading financial institutions considering the ban on traders participating in online chat rooms that link them to banks around the world. These possible reforms come amid rising scrutiny from bank regulators, according to The Wall Street Journal, which cited anonymous insiders aware of the situation.
According to the Journal, regulators see some of the above chat rooms and bulletin boards as possible backdrops for collusion among traders and “editing” of the stock market through said collusion. The Journal’s sources claim that the investigations are focusing on chat rooms such as “The Cartel,” and that apart from Citigroup and JPMorgan, Credit Suisse Corp. is another leading financial institution reviewing chat room activity.
This is not the first time that trader chat rooms have figured in banking news, as this newfangled form of communication was used by traders in editing the London interbank offered rate (LIBOR), which had subsequently cost banks billions of dollars and counting. Following the manipulation of the LIBOR, regulators have since become more wary of possible trader collusion, while also expressing concern about the legitimacy of rates at the present. In addition to the LIBOR controversy, the Swiss Financial Market Supervisory Authority (FINMA) recently admitted that it is “conducting investigations into several Swiss financial institutions in connection with possible manipulation of foreign exchange markets.” Neither Citigroup nor JPMorgan have been available to comment so far.