

The Cartel: How BP Got Insider Tips Through a Secret Chat Room - randomname2
http://www.bloomberg.com/news/2014-12-30/-cartel-chat-room-tied-to-bp-gave-fx-tips-from-banks-to-client.html

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dllthomas
Um, various comment sections and article verbiage aside, is "insider trading"
the issue here? It seems like this was currency markets, which I'm not hugely
familiar with... but I know that with regard to commodities there's not really
such a thing as "insider trading" in a legal sense and I'd weakly expect the
situation with currencies to be similar.

If you read about what was actually shared, though, _" tips about forthcoming
trades, details of confidential client business and discussions of stop-
losses"_, it sounds like there may have been some serious breeches of
fiduciary duty on the part of the people providing the information.

~~~
randomname2
Actually yes, BP has absolutely been acting like a collusive, insider trading
hedge fund if these accusations are proven. The similarities to Enron are
uncanny.

As per the article, BP is denying everything, and so the article is very
careful in phrasing BP's involvement:

 _" While there’s no evidence that any BP traders were members of the Cartel,
Usher participated in at least one chat room with White, according to a person
who has examined conversations that included both men. It couldn’t be
determined from the messages reviewed by Bloomberg News who sent the
information to BP or whether BP employees acted on any of the tips."_

Except they did: _" Traders at BP haven’t been accused of any wrongdoing. Last
year, within hours of regulators announcing probes, the chats between BP and
the banks were shut down, people with knowledge of the matter said. Soon
after, a compliance officer was placed on the desk for the first time, one of
them said."_

Not exactly what one would do if one was "innocent".

Interesting tidbit on how the Bank of England may have been involved in all
this rigging, FX market manipulation and criminal abuse of other market
participants:

 _" [Usher] joined JPMorgan as head of spot foreign exchange in 2010, where he
became a member of the now-defunct Bank of England’s Chief Dealers Sub Group,
a collection of about a dozen currency traders and central bank officials who
met at restaurants and bank offices to discuss industry developments."_

Which is why the Bank of England itself may have had to scapegoat its own
sacrificial lamb to avoid any further connection to this criminal cartel:

Chief FX dealer for the Bank of England, Martin Mallett, on November 12 _" was
dismissed by the Bank of England yesterday for “serious misconduct relating to
failure to adhere to the Bank’s internal policies,” according to a statement
by the central bank today."_

~~~
dllthomas
I didn't say they were innocent of any wrongdoing. I said that the wrongdoing
wasn't "insider trading", which is what most people have been discussing.

Price collusion and market manipulation are not "insider trading", nor is
breach of fiduciary responsibility. Insider trading is _probably legal_ in the
markets they were operating in, and it likely _should be_ (in commodities,
"you can't raise your price just because your costs went up - that's not
public information" is obviously ridiculous; I'm slightly less convinced about
currency). What seems to have happened was _worse than_ insider trading.

------
jacquesm
Those are some very serious accusations. This has the ring to it of the first
of a series of domino stones falling over.

~~~
justincormack
Not the first, this is the middle of the series, there have already been
fines.

~~~
randomname2
See also:

[http://www.wsj.com/articles/three-senior-traders-fired-
amid-...](http://www.wsj.com/articles/three-senior-traders-fired-amid-global-
forex-probe-1413312358) (Oct. 14, 2014)

[http://www.fca.org.uk/news/fca-fines-five-banks-for-fx-
faili...](http://www.fca.org.uk/news/fca-fines-five-banks-for-fx-failings)
(Nov. 12, 2014)

So the conventional wisdom was that this cartel involved almost exclusively
bankers at the largest global banks including JPM, Goldman, Deutsche,
Barclays, RBS, HSBC, and UBS.

This new article finally links banks with the other two facets of this FX-
rigging "triangle" cartel: private sector companies that have no direct
banking operations yet who have intimate prop trading exposure, as well as
central banks themselves.

------
FesterCluck
With the ease with which information is shared these days, there will be no
stop to this. The only solution is to put all traders on a level playing
field. Stop computerized millisecond trading, and gains will need to be
processed either randomly or with more lead time each day.

~~~
Mikeb85
> Stop computerized millisecond trading

This has absolutely nothing to do with insider trading...

~~~
dllthomas
And neither HFT nor insider trading have anything to do with this issue...

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orf
I think it's a bit ridiculous to expect traders not to use/trade inside
information like this, it's obviously going to happen.

~~~
jacquesm
That's very explicitly forbidden. It may be obvious to you but it's on par
with saying that bank robberies are going to happen. That doesn't make it any
more legal.

Messing with the market at this level will have very serious repercussions.

~~~
new299
A number of economists have argued that insider trading is a good thing (as it
efficiently adds information to the market) and should not be illegal:

[http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/26/i...](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/26/insider-
trading-makes-us-richer-better-informed-and-could-prevent-corporate-scandals-
legalize-it/)

~~~
dllthomas
This doesn't seem to have been insider trading, though. It seems to have been
people letting others know about orders they're about to make on behalf of
clients. I don't know of any economists who say that sort of breach of
fiduciary duty should be legal - it's nothing but handing over someone else's
money.

