South Korea's antitrust regulator fined 15 banks and securities firms a combined 1.63 trillion won (about $1.22 billion) today (Wednesday) for rigging government bond auctions. It is the largest penalty the Korea Fair Trade Commission (KFTC) has imposed in a single case.All 15 were primary dealers, the firms that buy government debt at auction and make a market in it, and they held 15 of the 18 licenses then in operation. The KFTC said their coordination kept auction yields from falling and raised the state's borrowing costs.The previous record was a 1.03 trillion won fine on Qualcomm over patent licensing. Ten of the 15 firms are brokerages, among them KB Securities, which added TipRanks analyst data to its trading apps last year.London's trading industry is coming home!Calls and Messages Before the CloseThe cartel ran from January 2020 to June 2023 and covered 150 auctions. In 145 of them, the dealers went past sharing information and agreed on the yields and volumes they would bid, the KFTC said.Staff traded figures by phone and messenger until one or two minutes before bidding closed. Some firms wrote the routine into handover documents and operating manuals, setting out when and how to reach rival dealers, so it carried on through staff changes and absences.The commission said the conduct "effectively neutralized the competitive bidding system and caused losses to state coffers."How the Fine Compares With Earlier Cartel CasesEarlier bond cartel cases in Europe, and the KFTC's own case against bank dealers in 2019, ended in much smaller totals.The European Commission fined Nomura, UBS and UniCredit a combined €371 million (about $452 million at the time) in 2021 over a government bond cartel and Rabobank €26.6 million in 2023 over euro-denominated agency bonds.In Seoul, the 2019 case over foreign exchange derivatives bids ended with 693 million won in fines on four global banks. By FinanceMagnates.com's calculation, Wednesday's total is more than 2,000 times that amount and about 2.7 times the 2021 European fine in dollars.KB Securities Faces the Largest BillKB Securities received the biggest single fine, 332.2 billion won, followed by NH Investment & Securities at 242.8 billion won and Mirae Asset Securities at 214.8 billion won.Shinhan Securities was fined 147.3 billion won. Industrial Bank of Korea was fined 135.8 billion won, the most among the five banks.The 10 largest fines published by local media add up to about 1.52 trillion won, by FinanceMagnates.com's calculation. That leaves roughly 104 billion won for the other five firms, and the three biggest brokers alone account for nearly half of the total.The KFTC will also refer seven firms to the Serious Crime Investigation Agency, citing their longer involvement.They include Mirae, which moved last month to buy Japan's Sanko Securities, as well as KB, NH Investment & Securities, Kiwoom Securities and Korea Investment & Securities.Korea Development Bank and Industrial Bank of Korea complete the list. Among the brokers not referred is Meritz Securities, which offers its clients US stocks through Webull and was fined 64.6 billion won.Dealers Dispute the Collusion FindingDuring the proceedings, the dealers argued that the contacts were routine market monitoring tied to their market-making duties, according to Korean press reports. They also said any fine should be based on their revenue from the auctions, not on the value of the bonds they won.The KFTC rejected that. It took about 54 trillion won of winning bids as the base, applied a rate of 4.5% and cut the result by 30%, well below its examiners' proposal of up to 20% on about 76.2 trillion won.The commission said it weighed how the dealer system works, including underwriting duties on the top dealers. South Korea's finance ministry, which sells its debt through the primary dealers, said it would take no separate action until the decision is final.The firms can still challenge the ruling in court. The ministry said it is watching for any drop in dealer participation at auctions and is considering guidelines on what information dealers may share.This article was written by Damian Chmiel at www.financemagnates.com.