Friday, 23 May 2014

Sharklays have broken the rules again: Part 287

Surprise, surprise, Barclays has been caught out cheating yet another price index. This time it’s the price of gold and a deal did wherein it agreed to pay out $3.9 million if the price was X, then the guy running the trading desk gamed the system so the actual price turned out to be Y. Nice. That the actual deal was done the day after Barclays was fined £290m for libor fixing in 2012 just adds to it all along with the Barclays CEO’s recent comments about how you need to pay top dollar to get the best staff cos the best staff make so much money.

Picking thru the Financial Conduct Authority’s official announcement about all this, I read how one of the reasons they fined Barclays was because from 2004. when it joined the group of banks involved in this specific market, it had been: “unable to adequately monitor what trades its traders were executing in the Gold Fixing or whether those traders may have been placing orders to affect inappropriately the price of gold in the Gold Fixing … until 21 March 2013”

Plus, the incident they got fined for only appears to have come to light because the customer complained prompting the question how many others got ripped off like this over the 9 year period it was (a) possible and (b) actively encouraged via bonuses?

The 96 grand fine levied on the guy who did it in the first place prompts additional questions like; is that it? When do the fraud charges start? Why so small a fine given how much he received in pay and bonuses as the director of a trading desk because you know, you need to pay top dollar to get super star traders to work for you?

Then there’s the bigger picture and how when the libor scandal first broke some fools claimed there was nothing to see here and that we should all just move along because it was no more than one or two rotten apples. This argument was utter pants then and even more pants now that yet another investment banking activity has been shown up to have been open to systematic abuse for years and to have actually been abused in practice.

Next time someone speaks out in favour of big banker bonuses, the question they need to answer is how do they know these are rewarding expertise rather than criminality because what the latest Sharklays example makes clear is that the banks themselves can’t actually tell the difference (hence the FCA fine!).  In the meantime, where we to err on the side of caution, it increasingly looks like a reasonable chunk of big investment banker bonuses could be more accurately described as the proceeds of out and out crime!

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