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Define "Market" Irony: When JPMorgan's Chief Currency Dealer Is Head Of An FX Manipulation "Cartel"

Tyler Durden's picture





 

Now that everyone is habituated to banks manipulating every single product and asset class, and for those who aren't, see this explanatory infographic...

Foreign Exchanges

Regulators are looking into whether currency traders have conspired through instant messages to manipulate foreign exchange rates. The currency rates are used to calculate the value of stock and bond indexes.

 

Energy Trading

Banks have been accused of manipulating energy markets in California and other states.

 

Libor

Since early 2008 banks have been caught up in investigations and litigation over alleged manipulations of Libor.

 

Mortgages

Banks have been accused of improper foreclosure practices, selling bonds backed by shoddy mortgages, and misleading investors about the quality of the loans.

 

...revelations that this market and that or the other are controlled by a select group of criminal bankers just don't generate the kind of visceral loathing as 2012's Libor fraud bombshell.

As much was revealed when the second round of exposes hit in the middle of 2013, mostly focusing on manipulation in the forex market, and the general population largely yawned, whether due to the knowledge that every market is now explicitly broken (explaining the abysmal trading volumes and retail participation in recent years) or because nobody ever gets their due punishment and this kind of activity so not even a perp-walk spectacle can be enjoyed, this is accepted as ordinary-course action.

Nonetheless, we are glad that the actions of the FX cartel continue to get regular exposure in the broader media, in this case Bloomberg who, among other things, reminds us that it was none other than JPM's Dick Usher who was the moderator of the appropriately titled secret chat room titled "The Cartel" which we noted previously.  It is this alleged criminal who "worked at RBS and represented the Edinburgh-based bank when he accepted a 2004 award from the publication FX Week. When he quit RBS in 2010, the chat room died, the people said. He revived the group with the same participants when he joined JPMorgan the same year as chief currency dealer in London."

Yes, the chief currency dealer of JP Morgan, starting in 2010 until a few months ago when he quietly disappeared, was one of the biggest (allegedly) FX manipulators in the world. Define irony...

What are some of the other recent revelations?

Here is a reminder of the prehistory from Bloomberg. First came the chat rooms:

At the center of the inquiries are instant-message groups with names such as “The Cartel,” “The Bandits’ Club,” “One Team, One Dream” and “The Mafia,” in which dealers exchanged information on client orders and agreed how to trade at the fix, according to the people with knowledge of the investigations who asked not to be identified because the matter is pending. Some traders took part in multiple chat rooms, one of them said.

 

The allegations of collusion undermine one of society’s fundamental principles -- how money is valued. The possibility that a handful of traders clustered in a closed electronic network could skew the worth of global currencies for their own gain without detection points to a lack of oversight by employers and regulators. Since funds buy and sell billions of dollars of currency each month at the 4 p.m. WM/Reuters rates, which are determined by calculating the median of all trades during a 60-second period, that means less money in the pension and savings accounts of investors around the world.

 

...

 

One focus of the investigation is the relationship of three senior dealers who participated in “The Cartel” -- JPMorgan’s Richard Usher, Citigroup’s Rohan Ramchandani and Matt Gardiner, who worked at Barclays and UBS -- according to the people with knowledge of the probe. Their banks controlled more than 40 percent of the world’s currency trading last year, according to a May survey by Euromoney Institutional Investor Plc.

 

Entry into the chat room was coveted by nonmembers interviewed by Bloomberg News, who said they saw it as a golden ticket because of the influence it exerted.

And after that came unprecedented hubris and a sense of invincibility:

The men communicated via Instant Bloomberg, a messaging system available on terminals that Bloomberg LP, the parent of Bloomberg News, leases to financial firms, people with knowledge of the conversations said.

 

The traders used jargon, cracked jokes and exchanged information in the chat rooms as if they didn’t imagine anyone outside their circle would read what they wrote, according to two people who have seen transcripts of the discussions.

Since nobody investigated, next naturally, come the profits and the crimes:

Unlike sales of stocks and bonds, which are regulated by government agencies, spot foreign exchange -- the buying and selling for immediate delivery as opposed to some future date -- isn’t considered an investment product and isn’t subject to specific rules.

 

While firms are required by the Dodd-Frank Act in the U.S. to report trading in foreign-exchange swaps and forwards, spot dealing is exempt. The U.S. Treasury exempted foreign-exchange swaps and forwards from Dodd-Frank’s requirement to back up trades with a clearinghouse. In the European Union, banks will have to report foreign-exchange derivatives transactions under the European Market Infrastructure Regulation.

 

A lack of regulation has left the foreign-exchange market vulnerable to abuse, said Rosa Abrantes-Metz, a professor at New York University’s Stern School of Business in Manhattan.

 

If nobody is monitoring these benchmarks, and since the gains from moving the benchmark are possibly very large, it is very tempting to engage in such a behavior,” said Abrantes-Metz, whose 2008 paper “Libor Manipulation” helped spark a global probe of interbank borrowing rates. “Even a little bit of difference in price can add up to big profits.

... along with a lot of banging the close:

Dealers can buy or sell the bulk of their client orders during the 60-second window to exert the most pressure on the published rate, a practice known as banging the close. Because the benchmark is based on the median value of transactions during the period, breaking up orders into a number of smaller trades could have a greater impact than executing one big deal.

... and much golf and "envelopes stuffed with cash"

On one excursion to a private golf club in the so-called stockbroker belt beyond London’s M25 motorway, a dozen currency dealers from the biggest banks and several day traders, who bet on currency moves for their personal accounts, drained beers in a bar after a warm September day on the fairway. One of the day traders handed a white envelope stuffed with cash to a bank dealer in recognition of the information he had received, according to a person who witnessed the exchange.

 

Such transactions were common and also took place in tavern parking lots in Essex, the person said.

 

Personal relationships often determine how well currency traders treat their customers, said a hedge-fund manager who asked not to be identified. That’s because there’s no exchange where trades take place and no legal requirement that traders ensure customers receive the best deals available, he said.

In short - so simple the underwear gnomes could do it:

  1. Create a cartel
  2. Corner and manipulate the market
  3. Profit.

And that's why they (and especially Jamie Dimon) are richer than you.

 


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Thu, 12/19/2013 - 15:37 | Link to Comment Sufiy
Sufiy's picture


Bill Murphy: JPMorgan Silver And Gold Scandal Will Be Exposed


 We continue our research on Gold and Silver manipulations and this year has already provided us with a lot of revelations on this topic. So far China has benefited the most buying record amount of Gold at the artificially suppressed price levels. http://sufiy.blogspot.co.uk/2013/12/bill-murphy-jpmorgan-silver-and-gold...


Bloomberg: London Gold Vaults Are Virtually Empty

 Bloomberg quite suddenly provides some really interesting information about the state of the gold market and ongoing manipulations around it these days. Could the reports about JPMorgan being Net Long Gold now be correct in the end?

 

http://sufiy.blogspot.co.uk/2013/12/bloomberg-london-gold-vaults-are.htm...

Thu, 12/19/2013 - 15:46 | Link to Comment The Juggernaut
The Juggernaut's picture

THIS is why capitalism works.  What USA has is Corporate-Fascism.

Thu, 12/19/2013 - 15:56 | Link to Comment ACP
ACP's picture

I long for the day when...

"All those found guilty of manipulation, or aiding a person convicted of manipulation, or associating with a person convicted of manipulation, shall be sentenced to be hanged by the neck until dead."

...then the problem will be solved.

Thu, 12/19/2013 - 16:20 | Link to Comment 666
666's picture

Unfortunately it ain't gonna happen, my friend.

Thu, 12/19/2013 - 17:26 | Link to Comment BLOTTO
BLOTTO's picture

It doesnt matter what type of 'political title' you put on it.

.

In the end, man exploits man. The end.

Its been going on since 10,000 B.C.

.

Now what?

 

Thu, 12/19/2013 - 19:40 | Link to Comment bozzy
bozzy's picture

fork and dangle - fork and dangle. That'll do it.

Thu, 12/19/2013 - 18:29 | Link to Comment Ban KKiller
Ban KKiller's picture

True. Pass the bong and X Box. 

Thu, 12/19/2013 - 15:39 | Link to Comment MachoMan
MachoMan's picture

This activity is present in every system of governance...  Do we have the ingenuity to prohibit it?  Or are we forced to partake in remedial measures, which tend to be after any damage is done and, further, tend to be insufficient to fully remedy the situation?

Thu, 12/19/2013 - 15:43 | Link to Comment Crash Overide
Crash Overide's picture

AND THEIR GETTING AWAY WITH IT ALL...!!!   :(

Thu, 12/19/2013 - 16:07 | Link to Comment somecallmetimmah
somecallmetimmah's picture

NO THERE NOT...

Thu, 12/19/2013 - 18:02 | Link to Comment NotApplicable
NotApplicable's picture

Our To!

Thu, 12/19/2013 - 18:40 | Link to Comment Froman
Froman's picture

their....

Fri, 12/20/2013 - 02:08 | Link to Comment Crash Overide
Crash Overide's picture

I do it on purpose.

Thu, 12/19/2013 - 16:00 | Link to Comment James_Cole
James_Cole's picture

This activity is present in every system of governance... 

It's present in every human system period. The problem is when the few bad apples manage to grab hold of the power systems..

Thu, 12/19/2013 - 17:49 | Link to Comment MachoMan
MachoMan's picture

Yes, it's a basic biological issue...  However, the "few bad apples" ALWAYS manage to consolidate power sufficiently to materially control a society, so what's the solution?  We could work for the company store...  we could work for mao...  we could try and have a system of competition with a neutral government market regulator to force competition and prohibit the consolidation of power, but this neutral regulator never manages to stay neutral for very long...  what's the answer?

Thu, 12/19/2013 - 18:05 | Link to Comment NoDebt
NoDebt's picture

The answer is that the tree of liberty needs to be occasionally watered with the blood of tyrants and patriots.

The price of freedom is eternal vigilance.

It's an ongoing thing, in other words.  As will be my status on the NSA shit list after this post.

Thu, 12/19/2013 - 16:01 | Link to Comment Hippocratic Oaf
Hippocratic Oaf's picture

As a bond trader, number one that sticks out in my mind is how jpm screwed Jefferson County, AL

 

Thu, 12/19/2013 - 15:37 | Link to Comment The Gooch
The Gooch's picture

They BLEED just the same.

Thu, 12/19/2013 - 15:52 | Link to Comment alfred b.
alfred b.'s picture

 

     ,,,,I'd like to see more of that!!!

 

Thu, 12/19/2013 - 15:37 | Link to Comment put_peter
put_peter's picture

Wheres the PM market in the picture. Today i learned that PM stands for professional manipulation.

Thu, 12/19/2013 - 15:38 | Link to Comment nope-1004
nope-1004's picture

Honesty and integrity is totally unprofitable these days, especially amongst the banking crowd.  Selling ones soul for financial gain is not my idea of intelligent.

Guess that's why they're called "bankers".  Not the smartest people when it comes to creating real productivity.  They only know how to steal.

Nice.

 

Thu, 12/19/2013 - 15:50 | Link to Comment insanelysane
insanelysane's picture

Wrong, wrong, wrong.  Just like the NSA needs to invade our privacy in order to protect our privacy, the banksters are eliminating market risk by rigging the market.

Thu, 12/19/2013 - 15:52 | Link to Comment insanelysane
insanelysane's picture

Wrong, wrong, wrong.  Just like the NSA needs to invade our privacy in order to protect our privacy, the banksters are eliminating market risk by rigging the market.

Thu, 12/19/2013 - 15:40 | Link to Comment ussa
ussa's picture

Why don't you add the federal reserve act and primary dealers to your list adding the $trillions in interest and principal that was unnecessarily created via a private cartel. 

 

 

Thu, 12/19/2013 - 15:43 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Criminal indictments are the only thing that gets attention.  Simply forcing shareholders to take a hit in earnings isn't what it used to be.

Too Big to Fail

Too Big to Jail

Too Big to exist

Break'em up into Financial Utilities and Prop trading desks.

Thu, 12/19/2013 - 15:45 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

 

Here is a reminder of the prehistory from Bloomberg. First come the chat rooms:

At the center of the inquiries are instant-message groups with names such as “The Cartel,” “The Bandits’ Club,” “One Team, One Dream” and “The Mafia,” in which dealers exchanged information on client orders and agreed how to trade at the fix, according to the people with knowledge of the investigations who asked not to be identified because the matter is pending. Some traders took part in multiple chat rooms, one of them said.

 

So the NSA can get access to the whole SWIFT and VISA systems but can't monitor wide open instant messaging chats to protect wall street. Unpossible.

SWIFT and VISA and the NSA

http://www.spiegel.de/international/world/spiegel-exclusive-nsa-spies-on...

Now the NSA and playing protector to Wall Street.

http://www.techdirt.com/articles/20131009/18155424819/

And if they are also front running the markets. You put one and one together.

http://www.nakedcapitalism.com/2013/06/how-much-are-the-nsa-and-cia-fron...

Maybe instead of investigating each bank just investigate the NSA to get to the bottom of the manipulation problem of markets. It seems like they are a common thread in everything digital these days.

Thu, 12/19/2013 - 15:45 | Link to Comment agent default
agent default's picture

Wait until the news on the gold manipulation cartel starts piling up.  Story to break when everyone is shocked, SHOCKED I tell you to discover that the vaults are empty because China bought everything on a fire sale, while they were too busy  suspending supply and demand price discovery. 

Thu, 12/19/2013 - 15:46 | Link to Comment insanelysane
insanelysane's picture

Next someone will be saying that auction houses conspire to fix commission rates.

Thu, 12/19/2013 - 16:41 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Next someone will say that pro wrestling is fake.

Thu, 12/19/2013 - 18:04 | Link to Comment NotApplicable
NotApplicable's picture

Now that's just crazy talk.

Thu, 12/19/2013 - 15:46 | Link to Comment Iam Yue2
Iam Yue2's picture

Given the strategic significance Of the $5.3 trillion FX market, one must assume that these cowboys were being monitored by the NSA, GCHQ,
BND, et al. I mean, after all, they saw fit to monitor the Pope, for his very real and active role as a "threat to the financial system”.

We can then expect that every member of everyone of these groups will be duly shown the door (can't we.).

Thu, 12/19/2013 - 15:49 | Link to Comment Number 156
Number 156's picture

Conspiracy Fact.

Thu, 12/19/2013 - 15:59 | Link to Comment kralizec
kralizec's picture

I didn't get an envelope...but I am in a giving mood...

Lead at 2,000fps.

Mon, 12/23/2013 - 09:28 | Link to Comment bozzy
bozzy's picture

900 fps will do if you are talking 4's and a 12 guage at 10 yards

Thu, 12/19/2013 - 16:02 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Market Rigged, Manipulated, Like Sports, like Online Casinos, ...

Thu, 12/19/2013 - 16:17 | Link to Comment NO SOLICITING
Thu, 12/19/2013 - 16:03 | Link to Comment Conax
Conax's picture

There's no conspiracy here- all this bullshit is your financial system.

The NSA is there to help.

Thu, 12/19/2013 - 16:05 | Link to Comment rosiescenario
rosiescenario's picture

No need to really wonder why the "Justice Dept." does nothing.....just look at the amounts these same banks donate to political campaigns....either party.

 

So while the banks are busy breaking the law to rip off the public, the politicos are busy collecting their fee for making sure no laws are actually enforced or spending the public's money to bailout these very same crooks when they get in financial trouble.

 

It is simply amazing what is transpiring in NYC and DC today.

 

The Robber Barron Era cannot hold a candle to what is now being done.

 

 

Thu, 12/19/2013 - 16:15 | Link to Comment undercover brother
undercover brother's picture

this article suggests there should be some sort of oversight of traders by their own companies, the very same companies that benefit from their unscrupulous actions.   you can bet there is oversight, just not the type the author suggest.   furthermore, how many of those little white envelopes filled with cash made their way to the low paid SFO, SEC or CFTC investigators?  we'll never know for sure, but judging by the lack of prosecutorial effort or convictions, I'd say it was quite a few.

Thu, 12/19/2013 - 16:18 | Link to Comment WTFUD
WTFUD's picture

Clusterfuck! The sweety heady scent of manipulation. Breathe in, aaaah.

Thu, 12/19/2013 - 16:45 | Link to Comment The Invisible Foot
The Invisible Foot's picture

Remember "cartels" are a "Market Success" not failure.

Thu, 12/19/2013 - 16:53 | Link to Comment DaveyJones
DaveyJones's picture
  1. Create a cartel
  2. Bribe and control the regulatory bodies 
  3. Corner and manipulate the market
  4. Profit.
Thu, 12/19/2013 - 17:00 | Link to Comment williambanzai7
williambanzai7's picture

Thu, 12/19/2013 - 17:50 | Link to Comment Cornholiovanderbilt
Cornholiovanderbilt's picture

Where in the F did I put my pipe???!!!!!

Thu, 12/19/2013 - 18:53 | Link to Comment bozzy
bozzy's picture

Fork and dangle - the only answer.

Fri, 12/20/2013 - 01:10 | Link to Comment Itch
Itch's picture

"a handful of traders clustered in a closed electronic network could skew the worth of global currencies for their own gain without detection points to a lack of oversight by employers and regulators."

No that's not  lack of oversight, that's both turning a blind eye and naivety, respectively. 

"calculating the median of all trades during a 60-second period, that means less money in the pension and savings accounts of investors around the world"

That's the system doing its job then, that of parasite leech run by a harem of greedy fat fingered c**ts. 

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