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In Latest Market Rigging Scandal, Wall Street Now Sued For Treasury Market Manipulation
"Defendants used electronic chatrooms, instant messaging, and other electronic and telephonic methods to exchange confidential customer information, coordinate trading strategies."
"Traders at some of these primary dealers talked with counterparts at other banks via online chatrooms and swapped gossip."
Sound familiar?
Those quotes are from a 61-page complaint filed in the Southern District of New York wherein Boston’s public sector pension fund accuses all US primary dealers (the cabal of usual suspect dealer banks that transact directly with Treasury and "have a special obligation to ensure the efficient function" of what was formerly the deepest, most liquid market on the planet) of colluding to manipulate the $12.5 trillion US Treasury market.
The alleged scheme (tipped here last month) was remarkably simple and involved precisely the same sort of conspiratorial, chatroom shenanigans employed by the very same banks who, at various times, have colluded to rig FX, gold, various -BORs, ISDAfix, and pretty much everything else.
In short, the banks simply conspired to keep the spread between the when issued price and the price at auction as wide as possible, thus inflating their profits at the expense of everyone else where "everyone else" includes institutional investors and hedge funds all the way down to retirees and Main Street in general. From the complaint:
Defendants employed a two-pronged scheme to manipulate the Treasury securities market. First, Defendants used electronic chatrooms, instant messaging, and other electronic and telephonic methods to exchange confidential customer information, coordinate trading strategies, and increase the bid-ask spread in the when-issued market to inflate prices of Treasury securities they sold to the Class. Second, Defendants used the same means to rig the Treasury auction bidding process to deflate prices at which they bought Treasury securities to cover their pre-auction sales. Recent reports confirm that traders at some of these primary dealers "talked with counterparts at other banks via online chatrooms" and "swapped gossip about clients' Treasury orders.
By engaging in this unlawful conduct, Defendants maximized the spread not only for transactions in the when-issued market, but also between their buy (auction) price and sell (when-issued) price.
And of course the collusion didn’t just affect the cash market but every market linked to Treasurys.
This conduct lined the pockets of Defendants while raising prices to investors trading Treasury securities in the when-issued market, investors trading Treasury security-based futures and options, and investors transacting in instruments benchmarked to the prices of Treasury securities determined at auction, including certain bonds and other asset- backed securities and interest rate swaps.
Given the tight correlation between the Treasury securities prices in the spot market and futures markets, Defendants' manipulation of the auction prices for Treasury securities also directly and proximately caused injury to individuals and entities that traded in Treasury futures and options on U.S. exchanges, including the Chicago Mercantile Exchange.
Amusingly, it appears as though the banks got caught when, in the wake of the LIBOR scandal, they began to rein in the collusion, after which the difference between the manipulated market and the real market was impossible to ignore.
Plaintiff's experts further found that bid-ask yield spreads of Treasury securities in the when-issued market were higher in the period leading up to the revelation of the LIBOR scandal than they were after the scandal broke. Plaintiffs' experts found the change in these spreads to be statistically significant.
These observations support the proposition that spreads before the LIBOR scandal revelation were artificially high and, following the public announcement of the scandal, returned to competitive levels, as several of the same Defendants involved in the LIBOR scandal engaged in substantially similar misconduct in the Treasury market. This price artificiality could only have been caused by Defendants' collusive behavior in both the when-issued market and at the Treasury Department auctions.
And in case all of the above isn’t clear enough, here’s a step-by-step guide to rigging the Treasury market:
Similar to what DOJ discovered in connection with its criminal investigation into the FX market, Defendants' employees also used electronic chatrooms and other media to share confidential order flow information and collude on the prices of Treasury security transactions in the when-issued market. Defendants used these same electronic means to collude with respect to their bidding strategies at Treasury Department auctions so that they could maximize their gains in auctioned Treasury securities.
First, Defendants' traders agreed to artificially inflate the prices of Treasury securities in the when-issued market through coordination of bid-ask spreads. Defendants communicated with each other during the when-issued market to ensure that prices of when- issued Treasury securities would stay at supracompetitive levels.
However, because Defendants are primary dealers—and thus were required to bid at Treasury Department auctions—Defendants, individually and collectively, generally maintained short positions in the when-issued market. Defendants needed to be able to cover these positions profitably. Thus, they needed to fix the prices at which they bought Treasury securities from the Treasury Department.
And that's exactly what Defendants did. Defendants coordinated their bidding strategies at the Treasury Department auctions to artificially suppress the prices they would pay for their bids. This had the effect of benefiting the short positions they maintained in the when- issued market by allowing Defendants to cover their positions with low-cost Treasury securities purchased at auction.
By artificially increasing the spread between prices of Treasury securities in the when-issued market and at auction, Defendants were able reap supracompetitive profits— essentially shorting (selling) Treasury securities artificially high in the when-issued market and then buying them at artificially low prices in the Treasury Department auction to cover their short positions.
There you go. Buy low, sell high. Guaranteed. Every single time. Thank you, illegal collusion.
For those unfamiliar with the story behind the recent "guilty pleas" the DoJ extracted as part of Attorney General Loretta Lynch's push to show how very serious the post-Holder Justice Department is about prosecuting Wall Street malfeasance, allow us to explain exactly how this will pan out. There will be fines, which will appear large to the public but which amount to a rounding error for the banks. Depending upon what concessions the SEC and various other regulators are willing to make regarding waivers for the accused, there may be a few tongue-in-cheek admissions of guilt which will be met with fanfare and congratulatory handshakes at the DoJ. And that will be that. Obviously no actual people will be punished.
And as for the Treasury market, well, it was cornered long ago by the Fed and HFT, which means it is now infintely more dangerous than it ever was when it was beholden to mortal manipulators and carbon-based conspirators.
On the bright side, we'll likely get a look at a transcript detailing just what was said inside the Treasury rigging chatrooms, where we assume newbies were told to "sleep with one eye open" and where the mantra was likely some derivation of the Cartel creed "if you aint cheating, you aint trying."
Full complaint below.
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All financial regulators have been captured for years in the land of the free. Long live the free and fair markets of the West.
Over 6,000,000 cases of mortgage fraud that led to the last financial crisis and not one bankster went to jail
Captured ? you're hilarious.
If you want your manipulation....you can keep your manipulation.
Are all the market cops on a freakin donut break or something?
Whether you want manipulation or not, you're going to take it.
Good and hard.
And keep taking it.
$100m fine, no admission of wrongdoing, no sentencing (with the possible exception of a toilet cleaner) - an overall profitable strategy.
but banks are there for you. they really care. at least, that's what their propaganda, erm, adverts on british television keep telling us.
$100m fine, no admission of wrongdoing
Deal....same time tomorrow?
You know the Saying "This Shit never get's Old" ... Well it does!!!
Until heads literally roll and bodies of those who commit financial fraud are piled high in the street, this shit is old and tired and way past its rent seeking life.
Go and make something instead of stealing from those who do.
Make your fucking last will and testament and rid your self of the oxygen you wastefully Fucks
The mystery of the 100% trading wins quarter after quarter are not a mystery any more. It was just regular old cheating and stealing.
But of course it was because even a 0.5% chance of a loss made a loss-less quarter a statistical impossibility.
The SEC, we assume, was too busy viewing porn and still trying to understand what Markapoulous was telling them about Madoff to take any notice...
Isn't trading confidential information kind of what Snowden did?
Why is government secret info more important than people's secret information?
It is not. Government gets its rights and power from the people. Therefore it cannot have anymore power or rights than the people.
please take note that the gop will not mention one word about any frauds committed by any business any time. however, some desperate person seeking a better life by sneeking cross the border.....well they won't be able to shut up about it....just saying the contrast is as wide and deep as the grand canyon
Snowden is better than these scumbags. At least when he gave out confidenial info it was to hold the government accountable to the constitution that is supposed to restrict their powers.
The scum in this story only traded confidential info for their own greedy reasons. Their treatment and punishment should be much harsher than Snowden's.
I still haven't seen anything from Snowden that wasn't already outed in 2003 and common knowledge by 2007.
the funniest part is that the Primary Dealers are, or at least were, once upon a time, supposed to be market makers
but then the land of the free was washed over with market fundamentalist propaganda, which somehow takes the "invisible hand" and declares it a deity
where is the difference between an oldfashioned market maker and a market manipulator? well, as usual... it's about skin in the game and profits
since the principle of skin in the game does not apply fully to whatever is too big to fail or to prosecute for criminal doings... sponges of the state
emperor Vespasian was perhaps the first to adopt this approach we seem to see all around us, scandals or not scandals
he sent his commercial knights, his publicans out in the empire, had them collect taxes on the principle of tax-farming, and then called them back
to be squeezed like sponges, his very words, as famous as his "non oleat", i.e. money does not smell
oh, so it was all just propaganda, which everyone somehow bought into, that broke the market? hilarious!
I thought that the Fed was manipulating Treasury markets...
Looks like someone doesn't know what captured means in this context.
I'm pretty confident that the same brain activity that causes a child molester to be unable to resist the urge to continue is present within these guys. Chemical castration may be required
.
All too predictable.
Step 1: Settlement for a fine in the billions (amounting to as much as 10% of the grift) and no admission of wrongdoing*.
Step 2: Payoff the pension fund with a slice of the fine to demonstrate that Justice® has been done.
Step 3: Profit.
*If someone must be thrown under the bus, half a dozen prepared-in-advance fall guys will cop to a minor plea and be banned from financial work of any sort for a duration equal to the jail sentence for all crimes in Dudley Dooright cartoons (30 days). The fall guys will subsequently receive their pre-arranged additional supplement to their annual bonuses.
But the Confederate flag can be taken down and funds cut off to, "sanctuary cities" in a week.
So selling the SPR isn't enough ?
i guess they forgot to bribe the boston public sector pension fund managers
or Holders price is better.
We are already at the bottom of Exter's Pyramid in terms of manipulation .
Why the surprise here ? ... 2 Levels up.
https://en.wikipedia.org/wiki/John_Exter
Shocking.../
These behaviors have been shown to result from poverty and a lack of economic opportunity.
So the banks will get together as they are now too big to jail and pay their bribes. Some low level smuck will then lose his or her job and business will go on as usual. The SEC will contiue to provide their employees with laptops pre-loaded with their favorite porn sites and nothing will happen.
Except
Business as usual now in the financial sector!
Take comfort. Your public servants will still send a teenager to jail for smoking weed. Proof positive that government's not completely broken down.
Steal a pack of cigarettes and the punishment is death. Do this....and walk off.
Madoff could have learned some crap from Corzine.
#1: Don't steal from the tribe.
That covers Madoff. Just stupid.
Don't even have to steal the pack, buy it, try to sell one of the loosies for profit and you're stealing from the tax hungry guv. THEN you get killed.
"Thank you, illegal collusion"
You misspelled legal.
Manipulation -> the definition of modern monetary policy
I'm surprised some Randist isn't squealing about how they're interfering with the moral workings of business. If enlightened self-interest leads to conspiracies, then conspiracies must be moral, right?
Charges will be dismissed on account of they will do more damage to, rather than help the public psyche.
Every MKT rigged but oil right Tyler?
Oil should be much lower with all the Iranian tankers headed our way....so no....it's rigged too.
The only clean on Wall Street is their windows.
they create these systems, ie it is the primary dealer system (only allowing a limited number of banks to bid at auction / buy/sell to the fed) that seperates them from the rest of the market and gives them free money.
ie when the fed buys bonds from primary dealers (as part of QE or reinvestment) they dont buy directly from market the buy from the primanry dealers (pure inside trading) as they have knowledge of the price the FED is buying at ect and can simply buy from the secondary market and sell to FED.
ie there should be no primary dealers it should be free market Govt sellingh bonds.. well everyone whos set up (ie pension fund ect) just put your bid in and the best price gets it.
If the FED wants to buy ie QE they should go to the market and buy not a specific group of banks that pick off the banks.
So going after the group when the system was set up for them to get special treatment makes no sense.
Just as in Libor if you let people set the offer rate.. weil I guess their going to set it to suit themselves.
ie the rate should just be an average of the price traded during they day (not a traders suggested offer rate)
They set these things up to give banks advantage, then act shocked ..
If Martha Stewart went to jail, so should the bankers. Fines are not enough.
Martha Stewart went to jail for disputing the SEC's accusation, and there's evidence she was right. I think it was 'Interfering with government agents', which I never knew was a felony.
FX, libor, treasury, equities, commodities, futures, other derivatives. They rig them all because they "believe" they OWN them all and have a right to do so.
That is the problem with giving banks a completely independent authority to create infinite debt-money out of thin air. There is no control. There is no restraint. There is no rule of law.
It is a very big problem to fix.
Not a big problem to fix.
Hang, draw and quarter every last one of these cunts.
Start with Dimon and Blankfein though, please, and work down from the top of the shitheap.
surveying empire
for no more markets to rig
jamie dimon wept...
Maybe all the manipulators don't understand that various U.S. Government Agencies have an agreement with the NSA in order to easily obtain the needed data.Lots of mooches will be crying for a deal now in order to save their rotten hides from long prison sentences.
sure sure, and those who PRESCRIBED the pillars that support the manipulation didnt (at least indirectly) create the nsa! hilarious!
fuggin joke friday here!
How can there be prison sentences when the government is complicit?
Good news all you recent MBA grads. There will be three new job openings on Wall Street when the junior traders determined to be responsible for all of this get fired.
Self regulating industry, my ass!
Its like when I was in prison. Whenever I needed to shank a new fish because he disrespected the Bull(me), I would signal the CO's with a sly nod. They would politely nod back and then take a well timed 30 minute coffee break. I was free to end that fool with my toothbrush shiv and then enjoy getting my salad tossed by my favorite prison bitch. All in a day's work!
Whoever said that ZH doesn't include diverse perspectives stemming from equally diverse experiences?
Equal Opportunity always practiced at the soap laboratory....
His name was John Houser
Seriously . . . what the f*ck!!!!! I was a pretty good antitrust student in law school.
HEY REGULATORS, YOU GUTLESS YELLOW TURDS! Let me spell this out for you. . . .
Sherman Act.
Horizontal agreements here between competitors that restricted competition.
Illegal price fixing.
Slam dunk. I could have put this case together as a student.
There is no justice in this rotten system, and it sucks. What more can I say? I'm exasperated.
Don't worry at all... no one will go to jail, the bonuses will change shape but will not shrink and the new class will emerge richer than ever, freash as Fukushima dasies... The shareholders will be roundly punished though.
Banker-nado coming soon to a theater near you.
Treasury manipulation? I thought that's what the FOMC was for.
So is this 61 page charge being provided as a template for every other public employee pension fund? It's no wonder Texas has done a Hunt brothers request to go ahead and fill their futures contract at expiry instead of rolling it over. Time to take the chips off the table and open a new local Casino, this NY/DC operation is obviously past it's peak of freshness.
Does the NSA have records of these electronic communications that could be provided to prosecutors? Or do they protect and serve Wall St instead? These primary dealers are some of the biggest crooks on the planet and have stolen more money than we can imagine. But by all means let's use our spying agencies and justice system to catch petty drug criminals and other domestic "terrorists" instead.
Using telephony to fix elections (Tilden) and rig markets (Panic) since 1873.
When it comes to kneecapping America for our enemies foreign and domestic, these New Torc lawyers sure are quick to demand justus.
Salomon Brothers treasury bid rigging scandal 1991. Nearly went bkrpt as they were suspended from primary dealing.
1991...one guy makes too much its no good, 2015... as long as everybody cheats...it must be ok.
Let's all admit this is government sanctioned theft, and the Feds share in the theft by extracting their Vig in the way of "fines". The fines provide cover for Federal Government complicity. It doesn't matter if state pension funds get robbed, as long as the Fed's get their cut.
Let's all admit this is government sanctioned theft, and the Feds share in the theft by extracting their Vig in the way of "fines". The fines provide cover for Federal Government complicity. It doesn't matter if state pension funds get robbed, as long as the Fed's get their cut.