Competition Commission has referred a collusion case to the Competition Tribunal for prosecution against 17 banks, including three of South Africa's big banks, Absa, Standard Bank and Investec.
The Commission has been investigating a case of price fixing and market allocation in the trading of foreign currency involving the rand and dollar since April 2015.
How does currency trading work? How can one collude? What are the consequences on the economy?
Eusebius McKaiser finds out from Rand Swiss portfolio manager and market commentator, Gary Booysen, and Financial Mail deputy editor, Rob Rose.
Listen to the full interview below for more information and scroll down for quotes from parts of it...
Rand Swiss portfolio manager and market commentator, Gary Booysen,
Financial Mail deputy editor, Rob Rose,
What's forex trading?
Essentially, currency trading is taking one currency and converting it to another currency.— Gary Booysen, Rand Swiss portfolio manager and market commentator
Why do banks trade currency with each other?
Booysen says there are many reasons why banks practice currency, one being helping importers and exporters.
Banks would help customers either hitch positions if you are an import and export and want to create a contract to try and fix your price of currency, but to say I need a Rand/Dollar exchange at this level because I'm going to import these many cars from Korea and I need to fix the price so that I can plan my budgeting.— Gary Booysen, Rand Swiss portfolio manager and market commentator
What are the banks accused of?
Rose explains that there are many ways banks allegedly colluded, and here is one reason.
They colluded to say let's all offer our clients this amount of spread. If you are in a competitive market, and a client comes to you and says I want to change this and rate and spread is bad, a client will go to another bank. But if the other banks agrees to keep their rates to the same level, it manipulates supply and demand, and actually value client gets.— Rob Rose, Financial Mail deputy editor