
Five Big Banks Plead Guilty to Rigging Currency Markets and No One Goes to Jail - snowy
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=13889
======
stygiansonic
Here is a better explanation of what these traders did:
[http://www.bloombergview.com/articles/2014-11-12/banks-
manip...](http://www.bloombergview.com/articles/2014-11-12/banks-manipulated-
foreign-exchange-in-ways-you-can-t-teach)

Some additional reading:
[http://www.bloombergview.com/articles/2015-05-20/bank-
fine-s...](http://www.bloombergview.com/articles/2015-05-20/bank-fine-
scorecard-follow-along-at-home-)

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-sca...](https://medium.com/bull-market/oranges-and-lemons-the-
fx-scandal-in-perspective-cd3456089ce4)

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..._ "

~~~
randomname2
“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/2084...](https://s3.amazonaws.com/s3.documentcloud.org/documents/2084248/new-
york-fines-barclays-485-million-in-currency.pdf))

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
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
I'm pretty sure that financial companies are required by law to keep these
logs.

------
randomname2
One SEC commissioner has issued a "Dissenting Statement" as she was furious
that the SEC has made a mockery of "recidivist criminal behavior" by banks

[https://www.sec.gov/news/statement/stein-waivers-granted-
dis...](https://www.sec.gov/news/statement/stein-waivers-granted-dissenting-
statement.html)

~~~
rcarrigan87
wow, that pretty much sums it up. We have more than enough regs on the book to
reign in banks. We just choose not to enforce them.

~~~
m_alexgr
This. A result of the proverbial revolving door between regulators and the
banks. You can have regulations up the wazoo and it won't make a spec of
difference if they are not properly enforced. Even with the odd criminal
conviction bank regulation is kabuki theatre for mass consumption. These guys
get away with murder - literally. EDIT: yes, literally the murder of thousands
in Mexico. HSBC bank & Sinaloa cartel. HSBC in particular has a long history
of enabling drug cartels. The Opium Wars.

~~~
fennecfoxen
Literally, hmm? I'd be quite interested to hear about these murder cases you
allege (who murdered, who died, which jurisdictions and courts were involved,
et cetera).

------
rcarrigan87
Increased regulation in some regards has just driven further consolidation in
the banking industry. It also makes it more and more difficult for would-be
competitors to try and disrupt these banks.

I'm not sure that increased penalties, sending execs to jail, or more
regulation will fix banking. If the banks are "too big to jail/fail" then
maybe we should make them smaller...

~~~
hnnewguy
> _disrupt these banks._

What makes you think that the people involved in the disruption of the banks
won't partake in the same shenanigans? Do you think "bankers" are inherently
evil, while their replacements will be inherently good? The Bitcoin world says
otherwise. "Tech people" are stealing people's money left and right.

> _If the banks are "too big to jail/fail" then maybe we should make them
> smaller..._

Sure, and then we'll let all the pseudo-government-controlled banks in say,
China, or even Canada do all the large-scale banking business globally.

The business of banking is vastly larger than cheqing accounts and ridiculous
ATM fees that people like us deal with day to day and complain about. That's
_why_ the industry is heavily regulated, and why the banks are so large, and
why the local credit union in Podunk isn't underwriting the Facebook IPO. It's
also why some SV startup isn't going to ride in and up-end the industry
without itself becoming some financial behemoth that needs to be regulated.

~~~
jeffreyrogers
> The business of banking is vastly larger than cheqing accounts and
> ridiculous ATM fees

Right, but until recently the various functions of finance were embodied in
different institutions. Due to pressure from the banks themselves and from the
threat of competing banks in Europe the Gramm-Leach-Bliley Act[1] was passed
in 1999. This allowed banks to get much larger than they were before and to
operate as insurers, commercial banks, and investment banks simultaneously,
which they were previously prevented from doing.

Now, I agree with you that these are reasons SV startups won't "disrupt" the
banking industry. (Nor do I think this is desirable, but that is another
topic.) However, the idea that it is good to have massive consolidation of
bank functions into one large corporation is not immediately obvious to me.

[1]:
[http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bli...](http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act)

------
mootothemax
According to the radio this morning, the bankers who did this and the LIBOR
fixing _are_ facing jail - it's just that their cases are taking time to
progress.

I think it's safe to save the scandal for a little longer.

~~~
rcarrigan87
I think the article was more focusing on higher level execs that insulate
themselves from any criminal charges.

~~~
hueving
If a UPS truck driver drives drunk, do you expect the CEO to go to jail?

~~~
13years
Yes, if he new about it and didn't stop it, or even in some way condoned it
then he is certainly has responsibility.

~~~
Sven7
Yup. The sort of leadership Obama and Bush have demonstrated when things go
wrong. It flows down the food chain.

------
shameerc
Because -
[https://www.youtube.com/watch?v=iFDe5kUUyT0](https://www.youtube.com/watch?v=iFDe5kUUyT0)

~~~
sobkas
Calling gold coin a true money is so funny, because it doesn't have inherent
value by itself. It's only have value because people agreed to exchange things
and services for it. Like a printed money. And if someone thinks gold coins
didn't lost value over time...

------
TheAlchemist
It's really increadible. 3% of one year profits, for multiple year huge scale
robery. Not surprising, given the industry track record, but still mind
blowing when you think about the big picture.

~~~
cm2187
Did you read the report? [http://im.ft-
static.com/content/images/ee8b6f40-fef5-11e4-84...](http://im.ft-
static.com/content/images/ee8b6f40-fef5-11e4-84b2-00144feabdc0.pdf) The sort
of profits the regulator mentions is $16,000, $14,270, $59,000. Even if they
did that every day for 10 years, it is still pocket money compared to the
fine.

~~~
TheAlchemist
That are the sums that can be directly priced. The report also points to tens
of cases when the client/industry prejudice cannot be directly priced - for
example: "FX traders involved in the USD/Brazilian Real market colluded
together to manipulate markets in a more straightforward manner—by agreeing to
boycott local brokers to drive down competition. On October 28, 2009, an RBC
trader wrote “everybody is in agreement in not accepting a local player as a
broker?” A Barclays FX trader responded “yes, the less competition the
better." Those benefits, while impossible to calculate, where an order of
magnitude bigger than the direct ones.

Also, don't forget that those banks have huge privilegies (gov backing, FED
money, gov bonds dealership etc) in exchange for which they provide a fair
market and services. For instance, in theory those banks should have a lot of
their privilegies removed as the result of this case. I can assure you that
they are extremely happy to pay only the ~$6bn to keep those safe.

------
jackgavigan
Most people don't realise that the foreign exchange market was regulated very
differently from other financial markets for a long time. Regulators
acknowledged that the market was so liquid, transparent and competitive that
front-running simply wasn't an issue and, in fact, was an appropriate way to
fill client orders without exposing oneself to unnecessary risk.

Here's an article from May 2006 about the debate over whether the market needs
best execution regulations imposed upon it:
[http://www.euromoney.com/Article/1039431/From-the-archive-
Do...](http://www.euromoney.com/Article/1039431/From-the-archive-Does-FX-need-
best-execution-regulations.html?single=true)

~~~
j_lev
Absolutely. Even today, you can't compare it to other markets where execution
takes place on an exchange. "Honor among thieves" is the expression that comes
to mind when talking about FX.

------
mattmcknight
This article is bullshit. People are going to jail.
[http://rt.com/uk/193872-london-banker-libor-
guilty/](http://rt.com/uk/193872-london-banker-libor-guilty/)

~~~
teh_klev
That article doesn't say that at all. It says that the unnamed banker is being
prosecuted and "faces up to 10 years in jail".

The cynic in me reckons at best he'll get a fine, a suspended sentence and
we'll never know who he was. Not exactly justice.

~~~
mattmcknight
The initial article is still bullshit. Just a cursory google search reveals a
number of people in multiple countries on trial, many of whom have pleaded
guilty and are awaiting sentencing...
[http://www.theguardian.com/business/2014/oct/07/banker-
plead...](http://www.theguardian.com/business/2014/oct/07/banker-pleads-
guilty-libor-rigging-rate-fixing)

------
randomname2
It's also interesting how the stocks of UBS, Barclays and RBS immediately rose
despite a hefty $5.8 billion in fines. Which in practice aren't actually paid
by the banks, it's the shareholders, taxpayers (through bailouts) and
customers (through higher fees) who end up paying for this.

~~~
pas
It's not interesting. 6B is much less than a year of profit for all the
companies involved, and now with uncertainty cleared, they are now cash cows
in the eyes of more people, hence the rise in prices.

Also, the "paid by ..." is a very-very interesting topic. Due to their sheer
size and market share, they set the price for banking services. They don't
even need to collude, but since there are not too many global banking
conglomerates, they naturally have a sort of cooperation and competition,
which basically leads to similar prices. (Though a bit different price
structure, but that's irrelevant for a sizeable enough basket of financial
products and sample of consumers.)

So, it's quite impossible to force them to eat the fines, because for that
you'd need a bank that wasn't on in this "market optimalization", but is large
enough to absorb/caputre the market share if the culprits rise prices. But
there doesn't seem to be. (And local smaller banks are already doing as good
as they could to charm customers away from the big ones, so it's unlikely that
they'll help keeping prices down.)

However, if it's shareholders, that's not a problem. They should exercise some
responsibility when voting with their money. And while we're at that, the same
goes for taxpayers and customers too.

------
appleflaxen
Even before the 2008 financial crisis, these behaviors were happening.

Unchecked, cheating by bankers distorts the market equilibrium and creates a
bubble. The easiest example to see/understand for me is the pretend real-
estate value on banks' books during the housing/mortgage bubble.

We had a chance to deflate the bubble completely, but by failing to prosecute
the individuals, we only did it partially. Without criminal prosecutions, this
is going to happen again soon.

With criminal prosecutions it would still happen again, but we would be
insulated/innoculated for at least one generation of bankers and bank
managers.

We had an opportunity at that time to

------
hatheyn
Is there some way of incentivising prosecutors to focus their efforts on the
biggest problems?

For example, the prosecution of Aaron Swartz seemed gratuitously
disproportionate.

------
randomname2
The total costs of keeping everyone out of prison:

[http://i.imgur.com/16KcuHu.jpg](http://i.imgur.com/16KcuHu.jpg)

~~~
pas
Sources? Timeframe? Which year's dollars?

------
randomname2
For some reason, Bloomberg seemed amazed that the public yawned at the guilty
plea:

[http://www.bloomberg.com/news/articles/2015-05-20/once-
unthi...](http://www.bloomberg.com/news/articles/2015-05-20/once-unthinkable-
criminal-pleas-by-u-s-banks-get-investor-meh-)

Quote: "For all the muted response to Wednesday’s news, Donaldson Capital
Management LLC’s Greg Donaldson expressed concern that criminal charges may
now become routine. “Once you cross that line and admit you’ve done something
bad, you open up Pandora’s box,” said Donaldson, chairman of the Evansville,
Indiana-based firm that manages about $1.1 billion. “This settlement just
moved the goal post.”

If convictions become too commonplace, the government may have to pursue even
tougher penalties. "

No wonder the public yawns at this though. Here's Zerohedge listing all
confirmed rigged markets:

Libor - interest rates: [http://www.zerohedge.com/news/shocking-details-
barclays-epic...](http://www.zerohedge.com/news/shocking-details-barclays-
epic-lie-bor-fraud-duuuude%E2%80%A6whats-ur-guys-345-3m-fix%E2%80%A6tell-him-
get-it)

ISDAfix - swaps: [http://www.bloomberg.com/news/articles/2013-04-14/banks-
drop...](http://www.bloomberg.com/news/articles/2013-04-14/banks-drop-off-
isdafix-panel-amid-rate-rigging-probes)

Platts - oil prices: [http://www.zerohedge.com/news/2012-10-09/libor-gate-
comes-cr...](http://www.zerohedge.com/news/2012-10-09/libor-gate-comes-crude-
total-exposes-price-fixing-energy-market)

JP Morgan / BP - FX: [http://www.zerohedge.com/news/2014-12-30/rigging-
triangle-ex...](http://www.zerohedge.com/news/2014-12-30/rigging-triangle-
exposed-jpmorgan-british-petroleum-bank-england-cartel-full-frontal)

WM/Reuters - FX: [http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-
la...](http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-latest-
market-rigging-and-collusion-scandal-foreign-exchange)

High-Frequency Trading - equities:
[http://www.zerohedge.com/news/2013-06-11/hft-stock-
manipulat...](http://www.zerohedge.com/news/2013-06-11/hft-stock-manipulation-
action)

UBS - gold: [http://www.zerohedge.com/news/2014-11-09/another-
conspiracy-...](http://www.zerohedge.com/news/2014-11-09/another-conspiracy-
theory-bites-dust-ubs-settles-over-gold-rigging-many-more-banks-f)

------
rasz_pl
This happens all the time, for example movie The International (2009) is based
on a true story :o. Banks are above the law.

------
eternalban
They should take out student loans ..

------
shit_parade2
One law and process for the biggest banks and another law and process for
everyone else. That poor sucker currently rotting in a London jail for
allegedly being the cause of a flash crash probably wishes he had worked for a
big bank.

It is a farce to call this a criminal act when waivers remove all punishment
beyond a fine.

------
moopling
The invisible hand, was nowhere to be seen...

~~~
rcarrigan87
the invisible hand left banking a long time ago when the banks consolidated
into mega banks. For capitalism to work you need a high degree of
competition...

------
solve
How about we ban anti-finance hate articles like this from hacker news?

Certainly, the intent of these is not to spur in-depth intelligent
conversation.

~~~
yohoho22
So, on the one hand, you are a proponent of in-depth, intelligent
conversation.

On the other, you want to prohibit all discussion of news that might somehow
reflect negatively on certain people involved with some kinds of finance.

Is that right?

~~~
solve
No, that's wrong.

