7 ms·

Traders Do Less Crime at Home

68 points by super256 3y ago

laristine 3y ago
https://archive.is/munk5 https://archive.is/munk5
- mabbo 3y ago
  While of course the archive trick is great, for anyone who really liked this article you can sign up for Matt Levine's newsletter and get these in your inbox many times per week. https://twitter.com/matt_levine/status/994296126055608320?lang=en https://twitter.com/matt_levine/status/994296126055608320?la...
fxtentacle 3y ago
"If you are around your naughty friends all day, their naughtiness will rub off on you; some number of people who wouldn’t independently do financial crimes will do those crimes due to peer pressure" I believe that's the TLDR of the article and I fully agree. If you put a lot of competitive people into a highly competitive environment and some of them brag about gaining an edge by skirting the rules a bit, everyone else will also start pushing boundaries just to remain on the same rank on the competitive ladder. It's a classic Red Queen's Race: https://en.wikipedia.org/wiki/Red_Queen%27s_race https://en.wikipedia.org/wiki/Red_Queen%27s_race
- veggieburrito 3y ago
  Red Queen is an underrated analogy for so many things
- CSMastermind 3y ago
  Isn't it possible that financial crimes require discrete collaboration to avoid detection and a WFH situation prevents that from happening? Or conversely that WFH makes financial crimes easier to commit and harder to detect so we're seeing a drop in detected incidents but the real numbers haven't changed? Or that the there's another variable related to both that's causing it (like increased other vices that the article speculates)? Or that this is just random chance and financial crimes were going to decrease during this time period no matter what? I don't see any of those possibilities discussed in the underlying study. Though they do add several important disclaimers like all this data coming from a single firm in the UK, that they can't rule out trade volume as a driver (fewer trades means fewer crimes), and that WFH is still a relative novelty so behavioral patterns observed now might not be the same as those observed long term. It's definitely an interesting finding but I wish they had addressed other causes more robustly instead of speculating that WFH was the cause per se.
  - tialaramex 3y ago
    The discrete collaboration thing seems likely to me. Evidence in insider trading cases not infrequently involves some way for Bob who knows about X to tell Jim, who trades something related to X before X is public. If Bob and Jim are in the same office building this can happen very casually, and it's extremely deniable whereas if Bob has to make a Teams call to Jim, now that's traceable and they might both be called to explain it.
- phil21 3y ago
  Or perhaps the regulators and compliance officers meant to catch this stuff are less efficient out of the office? Could be many things at this point. Way too early to call. Plus, if negative behavior rubs off on you - wouldn't positive behavior? And if negative behavior rubs off on you better in the office vs. WFH, isn't that invalidating much of the argument most have for WFH? Interesting crime is considered more efficient in-office but legit business isn't. And if the argument is culture I think it proves the point even more so. I actually don't think WFH vs. in-office has much to do with this personally, but I find how the narratives change quite interesting.
- ilyt 3y ago
  It could not even be peer pressure, but just employees observing "hey, they can get away with this, if they can so can I"
akdor1154 3y ago
> But they find that the second effect predominates: “Working from home results in an absolute reduction of 14.7 percentage points in the annualized probability of an alert (misconduct report) per trading employee.” Well, then either WFH decreases risk of committing crimes... or they still happen just as much and it increases the chance they'll go undetected? A bit worrying that TFA doesn't discuss this, though I haven't read through to the the study itself.
- AmericanChopper 3y ago
  It could just reduce work, and crime as a second order effect, as crime still takes work. But I would theorise that it could decrease crime because it increases the likelihood of getting caught. Discussing a criminal conspiracy is much easier to do in person rather than over Teams, or any other communication software that leaves a record.
  - smcl 3y ago
    I mean while we're speculating we might as well throw in the other possibilities - like working from home might make you happier, resent your job less and less likely to try to fuck over your employer. In reality we don't know, but I don't think we need to assume it's due to lower productivity or increased sneakiness.
    - flakeoil 3y ago
      Trader crimes are not so much about screwing the employer. It's often aligned with the incentives of the employer i.e. make as much money as possible. The crime is more in that they use unlawful methods (or take on too much risk) to earn money for their employer and thus themselves via bonuses (and status, promotions etc).
      - spacebanana7 3y ago
        > Trader crimes are not so much about screwing the employer. It's often aligned with the incentives of the employer i.e. make as much money as possible. This really isn't the case, at least for large banks. Bank boards and CEOs would much rather have lower trading performance than get pulled up by regulators. It's very difficult for a bank CEO to get fired for being to cautious and regulator friendly. Mediocre financial results can always be excused in earrings calls with de-risking or social responsibility and few shareholders are interested in the political fallout of publicly disagreeing with that.
switch007 3y ago
I wonder if sales teams makes fewer sales at home ;)
jtode 3y ago
I have walked down a street named Wall in NYC but I've never been to Wall St and I know nothing firsthand about the culture there. I have, however, participated in very petty childhood and teenage crimes with other troubled boys, was a buyer of controlled substances for decades, and have been a gigging musician for periods of time, so I've been around criminality. One thing about every crime that involved more than one perpetrator that I know about is, there is a period of conspiring beforehand, which happens - must happen - away from the eyes of others. I encountered many weed dealers over the years who just used their cellphones as convenient appointment books/ledgers for the police, and I tended to not go back to them, cause they'll be out of business soon anyways. If you put a bunch of people controlling large sums of money in a single floor of an office building, it will be very easy to gather in a bathroom stall and plan the execution of any sort of crime over a few rails. They're basically being forced into it, because the environment itself guarantees obscene and ubiquitous graft. If they necessarily must communicate over digital means, they still can do it, there's plenty of ways to get encryption that works well enough to evade the pigs. But how many of these guys are actually smart enough to implement that? Most of them are going to assume that people smarter than them are keeping an eye. I connect to a remote desktop for work, and I take it for granted that they have my laptop's camera on when I'm connected. Because the light is on. Bet theirs is on too. It is probably more terrifying to them than Big Brother to Winston Smith. Any eye is terrifying to a criminal, and these fellows, they are still criminally-minded, they are just denied the crucial quiet, dark spaces in which to plan, so they are finding ways to stay happy with merely a million or two per year, with maybe a trip once or twice a year to plan a big score. If the USA really wanted to fix this, they would put every one of these people in a room by themselves and never let them talk to each other unless they're working for the same client I suppose. From home or at the office doesn't matter, but they should have twenty microphones around them at any moment they are working, each one monitored by a committed Marxist who would just love to hand them over to The State for Processing.
- Verdex 3y ago
  > Any eye is terrifying to a criminal I find this to be an interesting comment because there is supposedly an effect where simply an image of an eye being present tends to cause people to behave better. https://en.wikipedia.org/wiki/Watching-eye_effect https://en.wikipedia.org/wiki/Watching-eye_effect So, I guess the test would be to retrofit all dark collaboration corners of trading firms with pictures of eyes and see what impact that has on the detection of crime.
stevefan1999 3y ago
Well I guess because they are not just doing crimes. They're doing organized crimes. Organized crimes required effective coordination, and WFH curbs exactly that.
lvl102 3y ago
Used to be on a bulge bracket trading desk. This happens a lot. People do stupid things for money. Especially French derivative traders.
RcouF1uZ4gsC 3y ago
I also bet there is less harassment (sexual or otherwise) at home. There is a lot of behavior that can be hidden in in-person interactions that leaves a trail if you try to do it remotely.
easytiger 3y ago
Sounds like a questionable methodology to me. In my experience traders generally aren't allowed to work from home in investment banks (even all throughout the pandemic) with which I am familiar, except for a handful. That handful being the head of a desk etc who in fact does little day to day trading and has a more managerial job. Many people also WFH who are technically traders are in sales and doing very little day to day trading. People, as usual, reading tea leaves.

68 points by super256 3y ago

laristine 3y ago

https://archive.is/munk5 https://archive.is/munk5

mabbo 3y ago
While of course the archive trick is great, for anyone who really liked this article you can sign up for Matt Levine's newsletter and get these in your inbox many times per week. https://twitter.com/matt_levine/status/994296126055608320?lang=en https://twitter.com/matt_levine/status/994296126055608320?la...

fxtentacle 3y ago

"If you are around your naughty friends all day, their naughtiness will rub off on you; some number of people who wouldn’t independently do financial crimes will do those crimes due to peer pressure" I believe that's the TLDR of the article and I fully agree. If you put a lot of competitive people into a highly competitive environment and some of them brag about gaining an edge by skirting the rules a bit, everyone else will also start pushing boundaries just to remain on the same rank on the competitive ladder. It's a classic Red Queen's Race: https://en.wikipedia.org/wiki/Red_Queen%27s_race https://en.wikipedia.org/wiki/Red_Queen%27s_race

veggieburrito 3y ago
Red Queen is an underrated analogy for so many things
CSMastermind 3y ago
Isn't it possible that financial crimes require discrete collaboration to avoid detection and a WFH situation prevents that from happening? Or conversely that WFH makes financial crimes easier to commit and harder to detect so we're seeing a drop in detected incidents but the real numbers haven't changed? Or that the there's another variable related to both that's causing it (like increased other vices that the article speculates)? Or that this is just random chance and financial crimes were going to decrease during this time period no matter what? I don't see any of those possibilities discussed in the underlying study. Though they do add several important disclaimers like all this data coming from a single firm in the UK, that they can't rule out trade volume as a driver (fewer trades means fewer crimes), and that WFH is still a relative novelty so behavioral patterns observed now might not be the same as those observed long term. It's definitely an interesting finding but I wish they had addressed other causes more robustly instead of speculating that WFH was the cause per se.
- tialaramex 3y ago
  The discrete collaboration thing seems likely to me. Evidence in insider trading cases not infrequently involves some way for Bob who knows about X to tell Jim, who trades something related to X before X is public. If Bob and Jim are in the same office building this can happen very casually, and it's extremely deniable whereas if Bob has to make a Teams call to Jim, now that's traceable and they might both be called to explain it.
phil21 3y ago
Or perhaps the regulators and compliance officers meant to catch this stuff are less efficient out of the office? Could be many things at this point. Way too early to call. Plus, if negative behavior rubs off on you - wouldn't positive behavior? And if negative behavior rubs off on you better in the office vs. WFH, isn't that invalidating much of the argument most have for WFH? Interesting crime is considered more efficient in-office but legit business isn't. And if the argument is culture I think it proves the point even more so. I actually don't think WFH vs. in-office has much to do with this personally, but I find how the narratives change quite interesting.
ilyt 3y ago
It could not even be peer pressure, but just employees observing "hey, they can get away with this, if they can so can I"

akdor1154 3y ago

> But they find that the second effect predominates: “Working from home results in an absolute reduction of 14.7 percentage points in the annualized probability of an alert (misconduct report) per trading employee.” Well, then either WFH decreases risk of committing crimes... or they still happen just as much and it increases the chance they'll go undetected? A bit worrying that TFA doesn't discuss this, though I haven't read through to the the study itself.

AmericanChopper 3y ago
It could just reduce work, and crime as a second order effect, as crime still takes work. But I would theorise that it could decrease crime because it increases the likelihood of getting caught. Discussing a criminal conspiracy is much easier to do in person rather than over Teams, or any other communication software that leaves a record.
- smcl 3y ago
  I mean while we're speculating we might as well throw in the other possibilities - like working from home might make you happier, resent your job less and less likely to try to fuck over your employer. In reality we don't know, but I don't think we need to assume it's due to lower productivity or increased sneakiness.
  - flakeoil 3y ago
    Trader crimes are not so much about screwing the employer. It's often aligned with the incentives of the employer i.e. make as much money as possible. The crime is more in that they use unlawful methods (or take on too much risk) to earn money for their employer and thus themselves via bonuses (and status, promotions etc).
    - spacebanana7 3y ago
      > Trader crimes are not so much about screwing the employer. It's often aligned with the incentives of the employer i.e. make as much money as possible. This really isn't the case, at least for large banks. Bank boards and CEOs would much rather have lower trading performance than get pulled up by regulators. It's very difficult for a bank CEO to get fired for being to cautious and regulator friendly. Mediocre financial results can always be excused in earrings calls with de-risking or social responsibility and few shareholders are interested in the political fallout of publicly disagreeing with that.

switch007 3y ago

I wonder if sales teams makes fewer sales at home ;)

jtode 3y ago

I have walked down a street named Wall in NYC but I've never been to Wall St and I know nothing firsthand about the culture there. I have, however, participated in very petty childhood and teenage crimes with other troubled boys, was a buyer of controlled substances for decades, and have been a gigging musician for periods of time, so I've been around criminality. One thing about every crime that involved more than one perpetrator that I know about is, there is a period of conspiring beforehand, which happens - must happen - away from the eyes of others. I encountered many weed dealers over the years who just used their cellphones as convenient appointment books/ledgers for the police, and I tended to not go back to them, cause they'll be out of business soon anyways. If you put a bunch of people controlling large sums of money in a single floor of an office building, it will be very easy to gather in a bathroom stall and plan the execution of any sort of crime over a few rails. They're basically being forced into it, because the environment itself guarantees obscene and ubiquitous graft. If they necessarily must communicate over digital means, they still can do it, there's plenty of ways to get encryption that works well enough to evade the pigs. But how many of these guys are actually smart enough to implement that? Most of them are going to assume that people smarter than them are keeping an eye. I connect to a remote desktop for work, and I take it for granted that they have my laptop's camera on when I'm connected. Because the light is on. Bet theirs is on too. It is probably more terrifying to them than Big Brother to Winston Smith. Any eye is terrifying to a criminal, and these fellows, they are still criminally-minded, they are just denied the crucial quiet, dark spaces in which to plan, so they are finding ways to stay happy with merely a million or two per year, with maybe a trip once or twice a year to plan a big score. If the USA really wanted to fix this, they would put every one of these people in a room by themselves and never let them talk to each other unless they're working for the same client I suppose. From home or at the office doesn't matter, but they should have twenty microphones around them at any moment they are working, each one monitored by a committed Marxist who would just love to hand them over to The State for Processing.

Verdex 3y ago
> Any eye is terrifying to a criminal I find this to be an interesting comment because there is supposedly an effect where simply an image of an eye being present tends to cause people to behave better. https://en.wikipedia.org/wiki/Watching-eye_effect https://en.wikipedia.org/wiki/Watching-eye_effect So, I guess the test would be to retrofit all dark collaboration corners of trading firms with pictures of eyes and see what impact that has on the detection of crime.

stevefan1999 3y ago

Well I guess because they are not just doing crimes. They're doing organized crimes. Organized crimes required effective coordination, and WFH curbs exactly that.

lvl102 3y ago

Used to be on a bulge bracket trading desk. This happens a lot. People do stupid things for money. Especially French derivative traders.

RcouF1uZ4gsC 3y ago

I also bet there is less harassment (sexual or otherwise) at home. There is a lot of behavior that can be hidden in in-person interactions that leaves a trail if you try to do it remotely.

easytiger 3y ago

Sounds like a questionable methodology to me. In my experience traders generally aren't allowed to work from home in investment banks (even all throughout the pandemic) with which I am familiar, except for a handful. That handful being the head of a desk etc who in fact does little day to day trading and has a more managerial job. Many people also WFH who are technically traders are in sales and doing very little day to day trading. People, as usual, reading tea leaves.