Bank of England Fires Chief FX Dealer Participating In Currency-Rigging Scandal

Tyler Durden's picture

Early in 2014, when the FX rigging scandal was still news, one of the most disturbing developments to emerge was that none other than the venerable Bank of England itself had been engaged in collusion with various manipulating parties, explicitly those participating in "The Bandits Club", "Cartel" and other chatrooms, as described in "Bank Of England Encouraged Currency Manipulation By Banks." As Bloomberg reported at the time:

Bank of England officials told currency traders it wasn’t improper to share impending customer orders with counterparts at other firms, a practice at the heart of a widening probe into alleged market manipulation, according to a person who has seen notes turned over to regulators.

 

Traders representing some of the world’s biggest banks told officials at the meeting that they shared information about aggregate orders before currency benchmarks were set, three people with knowledge of the discussion said. The officials said there wasn’t a policy on such communications and that banks should make their own rules, according to the people. The notes could drag the U.K. central bank into another market-rigging scandal two years after it was criticized by lawmakers for failing to act on warnings that Libor was vulnerable to abuse.

Of course, the Bank of England promptly denied everything and pulled the Hogan's Heroes defense: "It knew nothing", and yet something stank.

The BOE is probing allegations officials condoned practices at the heart of a widening rigging scandal involving traders at the world’s largest banks. It said today the investigation has found no evidence to date its employees were involved in collusion.... The suspended individual, who wasn’t named, is being investigated and “no decision has been taken on disciplinary action.”

...

At a July 4, 2006, meeting led by BOE chief dealer Martin Mallett, attendees discussed “evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix,” according to the minutes. “It was noted that ‘fixing business’ generally was becoming increasingly fraught due to this behavior.”

...

In a May 2008 meeting of the subgroup, a “large majority” of those present expressed “concern about the lack of transparency among some methodologies and the impacts in managing order flow and pricing liquidity at times of concentrated benchmarked interest such as the 4 p.m. London fix.”

...

At that discussion “it was suggested that using a snapshot of the market may be problematic” and “could be subject to manipulation,” according to the minutes.

...

“This extensive review of documents, e-mails and other records has to date found no evidence that Bank of England staff colluded in any way in manipulating the foreign exchange market or in sharing confidential client information,” the central bank said in today’s statement. “The Bank of England does not condone any form of market manipulation in any context whatsoever.”

Today, as widely reported previously, 5 banks settled with regulators such as US CFTC, UK's CFA and Swiss Sifma, for a total amount of $3.3 billion ($1.4 billion to the CFTC, $1.75 billion to the CFA). The banks were:

  • HSBC Holdings PLC
  • Royal Bank of Scotland Group PLC
  • UBS AG
  • Citigroup Inc.
  • J.P. Morgan Chase & Co.

Hilariously, as a result of "cooperating" the 5 banks received a 30% discount on their British settlement. Because when it comes to admitting one's crime there is apparently a pre-Thanksgiving blue light special.

Oddly enough, none of the other usual suspect banks, such as Goldman, Credit Suisse or Deutsche, all of whom also fired legacy FX traders and dealers, were once again completely forgotten, because clearly one can't disturb the two banks that pull the strings in the US, Goldman, and in Europe, Deutsche.

However, one less than critical bank stood out: as Bloomberg reports, Barclays dropped out due to issues with New York regulators, according to a person with knowledge of the matter. “After discussions with other regulators and authorities, we have concluded that it’s in the interests of the company to seek a more general coordinated settlement,” the London-based bank said in an e-mailed statement today.

By missing the full reduction on offer from U.K. regulators, Barclays may have to add to the 500 million pounds it set aside in the third quarter to settle currency probes, Sandy Chen, an analyst at Cenkos Securities Plc with a sell rating on the stock, said by e-mail.

“If you settle outside of stage one, which is the earliest stage, which is what this is, you get a 30 percent discount,” McDermott said at a press conference in London today. “If you settle outside of stage one you get a 20 percent or 10 percent discount.”

The New York Times reported Barclays’s perceived complications with the U.S. state’s regulator earlier. Barclays was concerned about civil liabilities and the potential of having its New York banking license revoked, the Times said.

Which means that the bank that consumed what was left of Lehman may be Lehmaned itself and soon be barred from operating in the world's financial capital, something which all of its revenue-strapped competitors will be delighted by.

But back to the Bank of England, which it turns out, lied about its involvement in FX rigging. According to Bloomberg, alongside the FX settlement announcement, the Bank of England fired its chief currency dealer - the abovementioned Martin Mallett - a day before he was faulted in an independent investigation for failing to alert his superiors that traders were sharing information about client orders.

Martin Mallett 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.

 

Mallett, who worked at the bank for almost 30 years, had concerns from as early as November 2012 that conversations between traders right before benchmarks were set could lead to the rigging of those rates, according a report today by Anthony Grabiner, who was commissioned by the central bank to look into what its officials knew about practices under investigation around the world. Mallett was “uncomfortable” with the traders’ practices, yet he didn’t escalate these concerns, Grabiner said.

 

“We’re disappointed because we hold ourselves to the highest standards -- we have an outstanding markets division,” BOE Governor Mark Carney said at a briefing in London today. “What Lord Grabiner found was that our chief dealer was aware of circumstances in the market that could facilitate or lead to improper behavior by market participants.”

And then just to keep the ball rolling, the BOE lied again!

Mallett “was not acting in bad faith,” according to the Grabiner report. He wasn’t “involved in any unlawful or improper behavior, nor aware of specific instances of such behavior,” it said.

Reuters adds, that the dismissal was unrelated to an ongoing foreign exchange scandal  "This information related to the Bank's internal policies, not to FX,” a BoE spokeswoman said on Wednesday. So... the Bank's internal policies on FX rigging?

Of course, Mallett's fate was sealed long ago when it became clear we was the man most directly implicated with rigging at the BofE. This is what the Times wrote in March:

Obscure prodigy poised to become centre of attention

 

Martin Mallett is not well-known outside the arcane circles of foreign exchange traders, but, along with the senior Bank of England officials Paul Fisher and Andrew Bailey, the public are likely to hear a lot about him in the coming months.

 

The Bank released 180 pages of minutes yesterday taken from meetings of a committee of senior currency traders that Mr Mallett chaired.

 

It was at one of the committee’s meetings in 2012 that Bank officials allegedly condoned the practice of sharing inside information before trading on the markets.

But back to the reason for Mallett's termination: we don't get it: was he fired for not rigging the market then according to the BOE's joke of an explanation?

Actually, scratch that: we do - Mallett's only crime was being exposed in the papers, and with that highlighting that the biggest ringleader when it comes to rigging markets is none other than the central bank itself. Which may have shocked someone in 2009 but now that even the CME openly admits foreign banks are among the biggest traders of the E-Mini, hardly anyone will notice.

And now we look forward to the next batch of revelations - the gold rigging scandal, and its prompt settlement for a few thousand dollars - and finding out how many central banks will fire personnel for not rigging that particular market.

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GetZeeGold's picture

 

 

I would have nail-gunned the SOB....but that's just me.

Arius's picture

poor guy ... he has just been carrying orders ... yeah well, c'est la vie

Silky Johnson's picture

Every fucking day a new crook. Can't we just round these fuckers up and execute them wholesale?

GetZeeGold's picture

 

 

We have some.....but no one seems to be learning from it.

 

Maybe we should stop reporting them as suicides.

cossack55's picture

Every time I see a BOA story the scenes from inside the bank in Mary Poppins springs forth.  They do all look like they are capable of floating.

BurningFuld's picture

Steal $20 and you go to jail. They are not dumb enough to steal small amounts of money.

Son of Loki's picture

He'll walk into a Bank Reuglation job with the gubmint for a few years until the dust settles ... then waltz back thru the swinging corp-gubmint doors back into the financial industry.

 

It's almost "paradoxical!"

SMG's picture

Even if you got all the current crooks, new crooks would rise to the top and take over.   The system they use to steal and control must be destroyed, only then will there be change for the better.

Government needs you to pay taxes's picture

Just like all the Nazi bastards at the Nuremberg trials.  I prey these fuckers meet a similar justice, or at least a group as competent as the Mossad stalks them to the ends of the earth.

Arius's picture

funny  ... what about if he was carrying their orders ... ever thought about that?

winchester's picture
winchester (not verified) GetZeeGold Nov 12, 2014 8:55 AM

no jail ?

 

for this type of humans, be in prison is just returning to normal civilian state/condition. ( ie: no control )

 

Save_America1st's picture

so these banks steal money, right?  Like hundreds of billions of dollars, right?  Then they're fined billions of dollars after the fact.

 

Q:  Who gets all those billions of dollars that they pay back in fines? 

I know I haven't received any big fat check in the mail from any regulator or bank for their admitted criminal FX, LIBOR, mortgage, or precious metals market rigging which costs me dearly every fucking day.

maneco's picture

Probably the Bank of England!

Pairadimes's picture

It goes to the government treasury, who then deposits it in the Bank of England, who then uses it to finance currency-rigging.

Intoxicologist's picture

I'd have used a mallet, just for shits and giggles.

ThirteenthFloor's picture

"It's like handing out speeding tickets at the Indianapolis 500"

new game's picture

fox guarding the hen house, ha, this fucker is just a sacrificial lamb. back to the program plez.

winchester's picture
winchester (not verified) new game Nov 12, 2014 8:55 AM

.

LULZBank's picture

+1

Couldn't have said it better myself.

new game's picture

thanx, as you articulate your thoughts quite well...

pods's picture

"Blood, lamb's blood painted door, I shall pass."

They have to get it from somewhere, why not this guy.

pods

SilverIsKing's picture

Please be patient. The headline has to read, "Ex-Bank of England Exec Commits Suicide."

Step one complete.

LULZBank's picture

Hope he doesn't convert to Islam just before that otherwise it can get explosive.

Save_America1st's picture

He received a suicide "discount" for being the first to go quietly.  The next guy who tries to whistleblow will get the full nail-gun treatment

Which is worse - bankers or terrorists's picture

"But, but....how are we supposed to make money if we can't rig the market!"

/sarc

Groundhog Day's picture

This morning on Bloomberg radio someone suggested that bankers need to go to jail for change, and the retard who hosts the cut him off and insisted thats not the solution.  Who would have thunk

 

A Nanny Moose's picture

Whoah! Let's not get carried away. That would imply the existence of the Rule of Fucking Law.

Do I need to apply my sarcasm flag here?

timeless21's picture

Maybe he helped to 'provide liquidity' so he's a good guy then.

JustObserving's picture

Sacrificial lamb to appease the public.  The corruption goes to the top.

Corruption is another name for Central Banking today.

LULZBank's picture

When it gets that high up, its not corruption anymore.

Something to do with thin air, and bankers being able to create money out of it.

Cognitive Dissonance's picture

The CB's have the blessing of the state, thus it is not illegal. Case closed. Essentially they are the state.

new game's picture

soooo, hmmm, what next, tolerate? seems as though the power of the printer prevails beyond ability of the majority to effectivly change. closed loop of power. ignorance is becoming the only option to live a best life once this knowledge is burned into the brain...

LULZBank's picture

Well you cannot change anything unless you have enough money to hire enough mercenaries with uniforms to enforce it.

Or you have a tribe that will stick with you but they have essentially destroyed the family. You are lucky if just your wife and kids can look after you. Hanging out with cousins and shit is so backward.. so tribal...

new game's picture

beyond frustration, like discussing something with wife when she goes silent and give me the look. key to this thought is i am right and she is wrong. moar one explains the moar the other gets pissed. ok, ok, in the case of these overlords, we are right and are getting the ignore treatment as we are outside their jurisdiction of fascism. plain and simple-violence is the ONLY  way to penetrate this structure. moar anger plez, then we are heading to the only way to change their control...

Which is worse - bankers or terrorists's picture

"Case closed. Essentially they are the state."

I'm not sure why they call it the Deep State when it is right on the surface. 

LULZBank's picture

Misdirection.

They always come up with interesting terms when you try to point out the obvious truth.

Cacete de Ouro's picture

"When it gets that high up, its not corruption anymore."

When it goes that high up (to the Governor of the Bank of England), they call it 'National Security'.

KickIce's picture

Exactly, until we get the head there is no change.  There are certain lizards that are able to lose their tails to throw off predators and can later regenerate the tail when the danger has passed.

Spartan's picture

On UBS : RTRS - SWISS REGULATOR FINMA SAYS IT FOUND CLEAR ATTEMPTS TO MANIPULATE  PRECIOUS METALS BENCHMARKS DURING UBS PROBE

 

That was on Reuters in the morning.

paint it red call it hell's picture

Wonder where they found a financial microscope powerful enough to reveal that little nugget?

Cognitive Dissonance's picture

If you read the fine print the BoE says what this guy did was not illegal, but not good, and that NO BoE official was involved in this sordid affair. In other words the BoE's hands are clean.

StychoKiller's picture

Right, and there's always only ONE termite!

Cognitive Dissonance's picture

Well.....that's a relief since I live in a log cabin. ;-)

cossack55's picture

Hurry. Switch to concrete logs.

jmcadg's picture

I do believe Mark Carney is on his way to change his name by deed poll to Pontius Pilate.