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Here is a better explanation of what these traders did: http://www.bloombergview.com/articles/2014-11-12/banks-manipulated-foreign-exchange-in-ways-you-can-t-te

Here is a better explanation of what these traders did: http://www.bloombergview.com/articles/2014-11-12/banks-manipulated-foreign-exchange-in-ways-you-can-t-teach http://www.bloombergview.com/articles/2014-11-12/banks-manip... Some additional reading: http://www.bloombergview.com/articles/2015-05-20/bank-fine-scorecard-follow-along-at-home- http://www.bloombergview.com/articles/2015-05-20/bank-fine-s... Quote: "They also got together in chat rooms to, essentially, lay off some of their client risk to one another prior to the fixing. That laying off of client risk, again, looks a bit conspiratorial, but it probably made markets more efficient, and is not obviously bad or illegal. Then they went beyond that efficient laying off of risk, trying to move the price in their favor. They seem to have made some money doing this, at the expense of their clients, but my suspicion was that they were "tinkering at the edges of real supply and demand," optimizing how they made money trading their combined customer order book rather than truly rigging the FX market." This is an alternative viewpoint: https://medium.com/bull-market/oranges-and-lemons-the-fx-scandal-in-perspective-cd3456089ce4 https://medium.com/bull-market/oranges-and-lemons-the-fx-sca... Quote: "Although there was some behaviour that was clearly on the other side of the line, the regulators also made clear that lots of the practices involved were not intrinsically criminal; this was an investigation into a grey area, not a straightforward case of lying. Of course, the industry has less than zero claim to the benefit of anyone’s doubt, and people will be instantly suspicious of claims that “it’s more complicated than that”, so maybe I can explain what went on in the FX market through the medium of a series of examples..."

marcosdumay 11y ago
Or, in other words, they abused the trust their clients had to get their money. Sounds like fraud, but if some administrative body decided fraud was legal, that really makes it so... And don't look at that small book governing your nation laws, it's irrelevant anyway.
- pjc50 11y ago
  No, read the Medium article again; the clients always had the option to specify "best execution" or their own trading strategy, but for simplicity and lowest broker fees chose to transact at the 4pm price. The clients (which are also large financial entities) are generally not screaming about fraud, they're just getting a deal that isn't as good as they thought.
  - fnordfnordfnord 11y ago
    Clients chose to go against their own best interest? For what reason? That doesn't make much sense. What makes more sense is that those clients were falsely led to believe that "simplicity and lowest broker fees" was the best choice.
    - sophacles 11y ago
      Without knowing in depth all the numbers involved, it's hard to declare it's clients choosing against their own best interest. There are considerations besides "most potentially profitable execution of a transaction or set of transactions". These concerns include but are not limited to: * risk tolerance * direct and indirect costs (fees wages etc) associated with other methods. * speed and/or predictability of transactions * how this particular bit of business fit into an overall hedging strategy * partnership considerations with the bank These all factor into why a client would choose one option over another, even if the chosen option looks like a lower gain. By analogy: this week I chose to have the dealership replace a broken mirror on my vehicle, rather than wait a day and have a nearby mechanic do so for $100 less. This choice was not the least expensive option, but it was the lowest hassle option. In terms of dollars it wasn't the most profitable transaction. In terms of spent time, it was still not the most profitable transaction. In terms of my risk tolerance and hassle, it was a good decision and I'm fine with it.
      - fnordfnordfnord 11y ago
        Let's not confuse this thread with an yet another appeal to "more study". Federal regulators, who are infamous for their inaction have made the rare determination that "the numbers" don't add up, with at least one SEC commissioner publicly furious that the SEC hasn't gone far enough. https://www.sec.gov/news/statement/stein-waivers-granted-dissenting-statement.html https://www.sec.gov/news/statement/stein-waivers-granted-dis... I'm not persuaded by your analogy in which you compare a one-time transaction relating to an infrequent type of event to a systematic conspiracy to deceive clients and competitors alike in transactions that occur frequently.
deleted 11y ago
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randomname2 11y ago
“Mess this up and sleep with one eye open at night.” Some examples of what these traders discussed in the chat rooms, from the Barclays consent order (https://s3.amazonaws.com/s3.documentcloud.org/documents/2084248/new-york-fines-barclays-485-million-in-currency.pdf https://s3.amazonaws.com/s3.documentcloud.org/documents/2084...) Quote: One particular chat room, referred to by the participating traders and other traders as the “Cartel” included FX traders from Citigroup, JP Morgan, UBS, RBS and Barclays who specialized in trading the Euro. One Barclays FX trader, when he became the main Euro trader for Barclays in 2011, was desperate to be invited to join the Cartel because of the trading advantages from sharing information with the other main traders of the Euro. After extensive discussion of whether or not this trader “would add value” to the Cartel, he was invited to join for a “1 month trial,” but was advised “mess this up and sleep with one eye open at night.” On one occasion, a Barclays FX trader explicitly discussed with a JP Morgan trader coordinating the prices offered for USD/South African Rand to a particular customer, stating, in a November 4, 2010 chat, “if you win this we should coordinate you can show a real low one and will still mark it little lower haha.” After the JP Morgan trader suggested that they “prolly shudnt put this on perma chat,” the Barclays trader responded “if this is the chat that puts me over the edge than oh well. much worse out there.” On June 10, 2011, the Barclays trader stated explicitly in another chat that “we trying to manipulate it a bit more in ny now . . . a coupld buddies of mine and I.” As the future Co-Head of UK FX Hedge Fund Sales (who was then a Vice President in the New York Branch) wrote in a November 5, 2010 chat: “markup is making sure you make the right decision on price . . . which is whats the worst price i can put on this where the customers decision to trade with me or give me future business doesn’t change . . . if you aint cheating, you aint trying.”
- stygiansonic 11y ago
  Very interesting quotes! It seems that the most damning evidence comes from these "chat room logs". I wonder if in the future, this sort of behaviour is going to move to OTR chats. (Assuming multi-party OTR becomes a reality)
  - dantiberian 11y ago
    I'm pretty sure that financial companies are required by law to keep these logs.

marcosdumay 11y ago

Or, in other words, they abused the trust their clients had to get their money. Sounds like fraud, but if some administrative body decided fraud was legal, that really makes it so... And don't look at that small book governing your nation laws, it's irrelevant anyway.

pjc50 11y ago
No, read the Medium article again; the clients always had the option to specify "best execution" or their own trading strategy, but for simplicity and lowest broker fees chose to transact at the 4pm price. The clients (which are also large financial entities) are generally not screaming about fraud, they're just getting a deal that isn't as good as they thought.
- fnordfnordfnord 11y ago
  Clients chose to go against their own best interest? For what reason? That doesn't make much sense. What makes more sense is that those clients were falsely led to believe that "simplicity and lowest broker fees" was the best choice.
  - sophacles 11y ago
    Without knowing in depth all the numbers involved, it's hard to declare it's clients choosing against their own best interest. There are considerations besides "most potentially profitable execution of a transaction or set of transactions". These concerns include but are not limited to: * risk tolerance * direct and indirect costs (fees wages etc) associated with other methods. * speed and/or predictability of transactions * how this particular bit of business fit into an overall hedging strategy * partnership considerations with the bank These all factor into why a client would choose one option over another, even if the chosen option looks like a lower gain. By analogy: this week I chose to have the dealership replace a broken mirror on my vehicle, rather than wait a day and have a nearby mechanic do so for $100 less. This choice was not the least expensive option, but it was the lowest hassle option. In terms of dollars it wasn't the most profitable transaction. In terms of spent time, it was still not the most profitable transaction. In terms of my risk tolerance and hassle, it was a good decision and I'm fine with it.
    - fnordfnordfnord 11y ago
      Let's not confuse this thread with an yet another appeal to "more study". Federal regulators, who are infamous for their inaction have made the rare determination that "the numbers" don't add up, with at least one SEC commissioner publicly furious that the SEC hasn't gone far enough. https://www.sec.gov/news/statement/stein-waivers-granted-dissenting-statement.html https://www.sec.gov/news/statement/stein-waivers-granted-dis... I'm not persuaded by your analogy in which you compare a one-time transaction relating to an infrequent type of event to a systematic conspiracy to deceive clients and competitors alike in transactions that occur frequently.

deleted 11y ago

[deleted]

randomname2 11y ago

“Mess this up and sleep with one eye open at night.” Some examples of what these traders discussed in the chat rooms, from the Barclays consent order (https://s3.amazonaws.com/s3.documentcloud.org/documents/2084248/new-york-fines-barclays-485-million-in-currency.pdf https://s3.amazonaws.com/s3.documentcloud.org/documents/2084...) Quote: One particular chat room, referred to by the participating traders and other traders as the “Cartel” included FX traders from Citigroup, JP Morgan, UBS, RBS and Barclays who specialized in trading the Euro. One Barclays FX trader, when he became the main Euro trader for Barclays in 2011, was desperate to be invited to join the Cartel because of the trading advantages from sharing information with the other main traders of the Euro. After extensive discussion of whether or not this trader “would add value” to the Cartel, he was invited to join for a “1 month trial,” but was advised “mess this up and sleep with one eye open at night.” On one occasion, a Barclays FX trader explicitly discussed with a JP Morgan trader coordinating the prices offered for USD/South African Rand to a particular customer, stating, in a November 4, 2010 chat, “if you win this we should coordinate you can show a real low one and will still mark it little lower haha.” After the JP Morgan trader suggested that they “prolly shudnt put this on perma chat,” the Barclays trader responded “if this is the chat that puts me over the edge than oh well. much worse out there.” On June 10, 2011, the Barclays trader stated explicitly in another chat that “we trying to manipulate it a bit more in ny now . . . a coupld buddies of mine and I.” As the future Co-Head of UK FX Hedge Fund Sales (who was then a Vice President in the New York Branch) wrote in a November 5, 2010 chat: “markup is making sure you make the right decision on price . . . which is whats the worst price i can put on this where the customers decision to trade with me or give me future business doesn’t change . . . if you aint cheating, you aint trying.”

stygiansonic 11y ago
Very interesting quotes! It seems that the most damning evidence comes from these "chat room logs". I wonder if in the future, this sort of behaviour is going to move to OTR chats. (Assuming multi-party OTR becomes a reality)
- dantiberian 11y ago
  I'm pretty sure that financial companies are required by law to keep these logs.