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FBD
10-30-2014, 02:35 PM
First it was Libor, then gold, then dark pools, now for those who want a glimpse into just how for years bank FX traders, whether belonging to "The Cartel" or "The Bandits Club" or otherwise, colluded on trades around the daily fix, breached fiduciary duty, and generally engaged in illegal rigging of the world's largest market by volume, Bloomberg News had received a transcript of the instant-messages by various FX traders currently being investigated for FX rigging.

As Bloomberg news reports, it has "reviewed the transcript of a conversation that spanned about 40 minutes on the condition that neither the traders nor clients named in them would be identified. Another dealer from Barclays and two from Zurich-based UBS AG were logged onto the thread at various points during the chat. The exchanges are the sort of discussions banks are trying to end by banning group chats involving employees at other companies."

Here is glimpse into how yet another market was, and still is, rigged on a daily basis.


http://www.bloomberg.com/news/2014-10-29/sterling-lads-chats-show-fx-traders-matching-fix-orders.html

“Any fix quid?” a currency trader at Barclays Plc asked a counterpart at HSBC Holdings Plc at 2:25 p.m. on June 23, 2011. “Get 50 cable on fix,” he said as he tried to sell British pounds.

“Nothing as of yet mate,” replied the HSBC trader, according to a transcript of the “Sterling Lads” instant-message group provided to Bloomberg News by a person with knowledge of a global investigation into alleged currency-rate rigging. “I hope not either, as everything I touched today has cost me money. I just lost 10k there typing.”

Opaque conversations such as this are at the heart of the probe into allegations that traders at some of the largest banks used instant-message groups to share information about their positions and client orders to rig benchmarks used by pension-fund managers. Authorities also are weighing whether traders used groups like Sterling Lads, and others with names such as “The Cartel” and “The Bandits’ Club,” to break rules in their discussions with counterparts at other banks.

Currency “sales people and traders by and large react and perform around exchanges of information,” said Stuart Murdoch, a litigation consultant at Turing Capital LLP in London and former foreign-exchange trader. The question is whether these exchanges “have actually gone beyond what would be deemed reasonable in terms of imparting details of client behavior around order execution and price action.”



The Sterling Lads messages are full of casual banter, British slang and the lingua franca of foreign-exchange traders, with pounds or cash referred to as quid and the amount of U.K. currency -- sterling -- to be swapped for dollars called cable.



Traders were open about using such message groups to match orders, telling authorities including the Bank of England that they help avoid losses in the hours before the benchmark is set, reduce volatility and get a better price for their clients, people familiar with those discussions have said.

Investigators in the U.S., Europe and Asia are poring over thousands of pages of transcripts like these looking for evidence of collusion to rig currency rates, trading ahead of clients and other possible wrongdoing. Spokesmen for Barclays and HSBC, both based in London, declined to comment about the Sterling Lads chats.

A minute after the Barclays trader’s request to sell 50 million pounds ($81 million) in exchange for dollars, the HSBC trader typed, “I can match. 50 quid.”





‘Fook Off’

The Barclays trader came right back with “Ta,” an informal way to say thanks.

“Rhx in about 50 quid at the fix,” the HSBC trader responded, probably a typo for rhs, or right-hand side, a term meaning he would buy the pounds at the 4 p.m. WM/Reuters rate. The benchmark is based on trades in a minute-long period starting 30 seconds before 4 p.m. in London.

“I let u know if i get any more,” the Barclays employee typed. “Can do 58 all day.”

After his counterpart said he’d do it, the Barclays trader wrote “actually 59 if ok,” indicating he wanted to sell as much as 59 million pounds.

“Fook off,” the HSBC trader wrote back.

“59 done thks u helm,” the Barclays trader said, signing off with a slangy British epithet.

Bloomberg News reviewed the transcript of a conversation that spanned about 40 minutes on the condition that neither the traders nor clients named in them would be identified. Another dealer from Barclays and two from Zurich-based UBS AG were logged onto the thread at various points during the chat. The exchanges are the sort of discussions banks are trying to end by banning group chats involving employees at other companies.

Dominik von Arx, a spokesman for UBS, declined to comment.





Gray Area

All three banks have said they are cooperating with investigations. They’re among several firms in settlement talks with regulators as authorities around the world look into allegations surrounding the $5.3 trillion-a-day currency market. U.S. and U.K. deals could be announced as soon as next month.

U.K. banks could be in breach of the Financial Conduct Authority’s Principles, a list of 11 standards for how regulated companies should behave, one lawyer said, asking not to be identified because his firm is representing a bank under investigation. Many traders are in roles requiring them to be approved by the FCA, putting them at risk of being penalized for violating those guidelines as well, the lawyer said.

The principles are broadly written, mandating firms do “business with integrity” and “observe proper standards of market conduct.” Individuals are required to do the same.

Lara Joseph, an FCA spokeswoman, declined to comment.

How client and order information “is conveyed has very much been coordinated around unwritten rules of conduct,” Turing Capital’s Murdoch said. While “much of this may sit within a gray area, some may end up being categorized as falling outside of the banks’ internal guidelines and what regulators would have expected.”