As we noted previously, one of the glaring omissions from the list of banks that were charged with rigging FX markets, and subsequently promptly settled with nobody going to prison as usual, which consisted of:
- Barclays PLC
- HSBC Holdings PLC
- Royal Bank of Scotland Group PLC
- UBS AG
- Citigroup
- J.P. Morgan Chase
- Bank of America Corp. Bank of America
Was none other than the bank which according to recent revelations, has undue control over the NY Fed, Goldman Sachs. And yet, moments ago the WSJ reported [12]that Goldman Sachs just fired a currencies trader who "allegedly was involved with the misconduct before he joined the firm."
So how is it possible that Goldman, which housed one of "The Cartel's" (or was it Bandits?) riggers, was never busted in the first place? Because apparently Goldman had no clue of his impeccable FX-rigging chat room credentials when it hired him from HSBC back in 2012.
Incidentally, when Cahill was hired by HSBC from Barclays, the bank said the following:
“Frank is a talented trader and we look forward to welcoming him to the team, where he will run our GBP/USD book. His hire is part of our continued build-out of our overall product and distribution capability."
Talented indeed. As for Frank's FX-rigging credentials, we find it very believable that he never again used these while employed by Goldman because the moment he walked through the door at 200 West, he was a changed man, doing merely god's work and nobody else's.
Frank Cahill, who joined Goldman Sachs in 2012 as a currencies trader after working at HSBC Holdings PLC, was asked to leave Goldman’s London offices on Tuesday as a result of his alleged involvement in the currencies-rigging affair, according to a person familiar with the matter.
“This relates to a period before he joined Goldman Sachs and he has now left the firm,” a Goldman Sachs spokeswoman said.
And then when he joined Goldman, he dropped everything, never entered another chat room ever again, and everyone lived happily ever after. Until now that is, because someone had to take the fall: that someone was Mr. Cahill was also happens to be a "cable rigger", no pun intended.
Mr. Cahill, a sterling trader, worked at Barclays PLC before joining HSBC in 2010, according to U.K. regulatory records. He was one of a number of unidentified HSBC traders whose conversations in electronic chat sessions were quoted by the U.K.’s Financial Conduct Authority and the U.S. Commodity Futures Trading Commission as part of their settlements with the British bank last week, according to people familiar with the chat transcripts.
Which is ironic, because the FCA complaint involving HSBC revolves precisely around a manipulator of sterling. Let's recall just how that one particular chat session, which generated $162K in profit for HCBS and Mr. Frank Cahill who ran HSBC's Cable book and almost certainly is the participant in the chat session - went:
An example of HSBC’s involvement in this behaviour occurred on one day within the Relevant Period when HSBC attempted to manipulate the WMR fix in the GBP/USD currency pair. On this day, HSBC had net client sell orders at the fix which meant that it would benefit if it was able to move the WMR fix rate lower.10 The chances of successfully manipulating the fix rate in this manner would be improved if HSBC and other firms adopted trading strategies based upon the information they shared with each other about their net orders.
In the period between 2:50pm and 3:44pm on this day, traders at four different firms (including HSBC) inappropriately disclosed to each other via chat rooms details of their net orders in respect of the forthcoming 4pm WMR fix in order to determine their trading strategies. The other three firms are referred to in this Final Notice as Firms A, B and C, as well as two other firms as Firms D and E. HSBC participated in a series of actions described below in an attempt to manipulate the fix rate lower.
- At 2:50pm, Firm A disclosed in a chat room (including to HSBC) that it had net sell orders for more than GBP100 million at the fix. At 3:25pm, Firm A indicated that the orders were for approximately GBP130 million.
- At 3:25pm, HSBC disclosed to Firm A in a one-to-one chat that it had net client sell orders for GBP400 million at the fix. Since HSBC and Firm A each needed to sell GBP at the fix each would profit to the extent that the fix rate at which it bought GBP was lower than the average rate at which it sold GBP in the market.
- Firm A informed HSBC that it now had net sell orders of GBP150 million at the fix. HSBC responded by saying “lets go”,11 to which Firm A replied “yeah baby”. The Authority considers these statements to refer to the possibility of HSBC and Firm A co-ordinating their actions in an attempt to manipulate the fix rate downwards.
- At 3:28pm in a chat room which included HSBC, Firm A expressed the hope that other traders would also have sell orders at the fix (“hopefulyl a fe wmore get same way and we can team whack it”). At 3:36pm, Firm B, which was a participant in the chat room, confirmed to the other traders that he now also had net sell orders for GBP40 million at the fix.
- At 3:28pm, HSBC informed Firm C via a one-to-one chat room that he had net client sell orders of around GBP300 million at the fix and asked the trader to do some “digging” to see if anyone else had orders in the same direction at the fix. Firm C replied at 3:34pm and disclosed to HSBC that it now also had net sell orders of GBP83 million at the fix.
- At 3:36pm, Firm D asked Firm A in a chat room (which included HSBC), for an update on its net sell orders. Firm A disclosed that it had now increased to GBP170 million. Firm D noted that it did not have any fix orders at that time, but commented that he expected Firm A to “bash the fck out of it”.
- At 3:38pm, HSBC commented simultaneously into chat rooms in which Firms A, C and D participated that it had net client sell orders at the fix for GBP in a “good amount”.
- At 3:42pm, in a one-to-one chat Firm A warned HSBC that another firm which was not a participant in the chat room (Firm E) was “buidling” in the opposite direction to them and would be buying at the fix.
- At 3:43pm, Firm A updated HSBC by indicating that it had netted some of its sell order off with Firm E and “taken him out… so shud have giot rid of main buyer for u…im stilla seller of 90… gives us a chance”. The Authority considers that this refers to Firm A’s belief that Firm E would no longer be transacting its orders in the opposite direction at the fix. It also confirmed that Firm A still held net sell orders for GBP90 million to trade at the fix and could still participate in the co-ordinated behaviour. This is an example of Firm A “clearing the decks”.
In the period from 3:32pm to 4:01pm, HSBC sold GBP381 million on Reuters and other trading platforms. Approximately GBP70 million (or 18%) of this volume was sold by HSBC in advance of the 60 second fix window around 4pm. During the period from 3:32pm to the start of the fix window, the GBP/USD rate fell from 1.6044 to 1.6009. These early trades were designed to take advantage of the expected downwards movement in the fix rate following the discussions within the chat rooms described above.
In the first five seconds of the fix window, HSBC entered a further nine offers to sell GBP101 million. During the first five seconds, the bid rate fell from 1.6009 to 1.6000. HSBC continued to enter offers throughout the remainder of the fix window and the bid rate fluctuated between 1.6000 and 1.6005.
HSBC sold GBP311 million during the fix window on Reuters and other trading platforms. The amount it sold on Reuters accounted for 51% of the volume sold in the GBP/USD currency pair on the Reuters platform during the fix window. Cumulatively HSBC and Firms A to C accounted for 63% of selling during the fix window. Subsequently, WM Reuters published the 4pm fix rate for GBP/USD at 1.6003.
The information disclosed between HSBC and Firms A, B and C, regarding their order flows was used to determine their trading strategies. The consequent trading by HSBC during the fix window was designed to decrease the WMR fix rate to HSBC’s benefit. HSBC’s trading in GBP/USD in this example generated a profit of approximately USD162,000.
Subsequent to the fix, traders in the chat rooms congratulated one another by saying: “nice work gents…I don my hat”, “Hooray nice team work”, “bravo…cudnt been better” and “have that my son…v nice mate” and “dont mess with our ccy [currency]”. One of the traders commented “there you go … go early, move it, hold it, push it”. HSBC stated “loved that mate… worked lovely… pity we couldn’t get it below the 00” and “we need a few more of those for me to get back on track this month”.
There you go indeed Mr. Cahill: "go early, move it, hold it, push it", and don't le the door hit you on your wait out when your new employer realizes that you were just guilty of the biggest crime possible in finance: getting caught.
As for Goldman, we expect the firm to never be charged with any rigging crimes: after all none of said riggers actually every abused their privilege while working at 200 West. They merely were hired for such manipulative skills.