District Court Restricts Currency Manipulation Claims to Transactions on U.S. Exchanges

The World in U.S. Courts: Summer and Fall 2016 - Securities Law/Commodities Exchange Act (CEA) | June.29.2016

In Re Foreign Exchange Benchmark Rates Antitrust Litigation, U.S. District Court for the Southern District of New York, September 20, 2016

This large class action litigation alleges that many U.S. and non-U.S. banks conspired to fix prices in the foreign exchange or foreign currency (either referred to as “FX”) market in violation of Section 1 of the Sherman Act and the CEA.  Among other issues, a number of the non-U.S. banks moved to dismiss CEA claims based on transactions “executed” by U.S. entities outside the country, arguing that the CEA could not be applied extraterritorially.

The District Court in New York followed prior precedent to the effect that the CEA was not to be given extraterritorial effect; that is, it provides a private right action to persons anywhere in the world who “transact business” in the U.S., but not to people “who choose to do business elsewhere.”  This permitted CEA claims to be based on transactions on U.S. exchanges, and the plaintiffs sought to extend rule to include transactions made on non-U.S. exchanges via Internet links or other platforms directly accessible in the U.S.  The Court rejected this argument, agreeing with prior decisions finding that the physical location of the trader did not determine the location where a transaction occurred.

[Editor’s Note:  The In re Foreign Exchange case is also addressed in the Antitrust/Foreign Trade Antitrust Improvements Act (“FTAIA”) section of this report.]

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