By FT Several banks, including Barclays, Citigroup and Royal Bank of Scotland, have banned the use of most group chat rooms in moves that highlight how global probes into alleged benchmark manipulation are driving a radical reform of trading floors.
Investigations into the Libor interbank lending rate manipulation scandal prompted RBS last year to ban unmonitored chat rooms where traders used to discuss market topics with rivals, two people familiar with those measures said.
“The bank clamped down on this big time. I think we were even going slightly overboard on this,” one senior banker said.
Citi two months ago banned traders’ chat rooms with multiple banks, restricting instant messages to conversations with traders at one bank at a time.
Barclays, which like the other two banks declined to comment, made similar reforms last year. Executives at JPMorgan are also examining whether conversations on so-called “multi-dealer” chat rooms should be carried out bilaterally over the phone.
Banks are re-evaluating their messaging systems as they grapple with the fallout from the Libor scandal and a global probe into alleged manipulation of the $5.3tn a day foreign exchange market, the latest in a series of benchmark-related rate-rigging investigations.
At least eight regulators in the UK, US, Switzerland and Hong Kong are involved in investigating more than 15 banks. That has so far triggered the suspension of at least a dozen traders across the globe amid suspicions that chat rooms were used to share sensitive client information.
RBS is looking into allegations that some traders have been talking to counterparts at other banks in chat rooms that were labelled as “client communication”, one person familiar with the internal probe said.
The Libor scandal, which has led to $3.7bn in fines, has raised banks’ awareness of the problems associated with chat rooms as investigators have seized on trails of incriminating messages, which have subsequently proved a public-relations nightmare for several banks.
“We wish we had never allowed chat rooms,” one top executive at a large European bank said.
But many of the most-used systems – such as the prevalent Bloomberg accounts – still operate outside the bank’s monitoring capabilities.
In recent months eight of the world’s largest investment banks have agreed to use a service operated by Markit, the UK data provider, that will connect market participants without taking them outside their own secure internal system.
Senior traders said it had long been a problem to stop junior members of the trading floor from talking too freely in chat rooms. One said: “As soon as you get them to stop, they just start up again. They say all sorts of stupid things