Four firms have been named in a lawsuit that was filed in the most corrupt court in the nation – the Southern District of New York where judges are free to change the very words spoken in court. I have constantly warned not to file suits there – they seem to go nowhere and are routinely dismissed protecting the banks. Goldman Sachs and HSBC are among four platinum and palladium dealers to be sued in New York for allegedly fixing the price of the metals. The four companies are said to have rigged prices for eight years. BASF and Standard bank were also named in the lawsuit.
A Florida-based maker of jewelry and police badges filed the complaint in Manhattan federal court.The defendants stand accused of having conspired since 2007 to rig the twice-daily platinum and palladium fixings. It is alleged that the companies illegally shared customer data and then used that information to engage in front running. This is really standard in all markets and has been part of the business overall since the 1970s. Proving that in court is an entirely different story.
Of course, front running is a form of market manipulation in which traders profit by using information about their clients’ trading intentions. This does not create systemic manipulation as to setting in motion a given trend. It will tend to accelerate a trend, but not change the direction of the market as a whole.
For years, floor traders knew where the stops were above and below the current market price. They would then often gun for the stops and at times even track how a particular client places their orders and what their positions would be.
Last month , the London Metal Exchange said it will take charge of platinum and palladium price-fixing, and use a new electronic platform from the December 1st. The fixings were alleged to be deliberately set to kick-off stops. The lawsuit is relying of these findings and has argued their manipulations are fact and that these changes “have come too late”.
International regulators have tightened scrutiny of pricing benchmarks in recent years. However, the regulators are typically in bed with the banks in the USA. Hope of winning this suit in NYC is not very high. They should have filed in London. One has to wonder why US lawyers run to NYC when they should know they never win. It seems more like just ripping off clients for big fees for a job they know is impossible.
