money: How the $ 30 billion money market has been rigged for years by some traders via cats

By Christian Berthelsen

Until 2014, the global benchmark price for silver and other precious metals was set every day during a phone call or during a meeting with traders from a handful of banks, a well-known century-old ritual. under the name of London Fix. Deutsche Bank AG was one of the banks.

As early as 2008, one of his traders began to conspire with a trader in

The bank, via electronic chat, to manipulate prices, according to court documents filed by silver investors seeking to broaden their claims that the market was rigged.

“I can’t wait to wait another day when we pull the bulldozer out of the garage on gold and sil,” the Fortis trader wrote on February 25, 2008. in the court papers.

The correspondence of the two traders – as trader Fortis moved to HSBC Holdings Plc and then Standard Chartered Plc over five years – is part of a cache of discussion board transcripts that, for the first time, provide insight into how which traders would have corrected silver price. The documents were provided to silver investors as part of a $ 38 million settlement in April between them and Deutsche Bank over allegations of market manipulation. In documents filed in Manhattan federal court last week, investors told a judge the transcripts offered compelling evidence to justify new claims against other banks.

Deutsche Bank declined to comment on the documents; he neither admitted nor denied wrongdoing as part of his settlement. Representatives of HSBC, Standard Chartered and BNP Paribas SA, which acquired Fortis Bank in 2009, also declined to comment.

In October, a judge dismissed investor claims against UBS Group AG because there was no evidence that its traders participated in the daily London Fix appeal. She said the complainants may seek to file a new complaint, which they are now asking to do. Peter Stack, a spokesperson for UBS, said the bank found “no basis for the complainant’s allegations” and “will vigorously defend itself against them”.

Representatives of Barclays Plc and other banks cited in court documents as participating in the manipulation of the silver market from 2007 to 2013 declined to comment, as did plaintiffs’ attorney, Vincent Briganti.

The new evidence comes from 350,000 pages of bank documents and 75 audio tapes handed over by Deutsche Bank as part of the deal. Traders are not identified by name in the statements.

The recorded conversations – peppered with “dude”, “brother” and assorted obscenities – are a “smoking gun” that reinforces claims that traders have rigged the prices of silver, which has an impact on prices jewelry, investments in silver and the profits of mining companies that sell crude raw materials to refiners, the plaintiffs say. Traders have acted against the interests of their own clients, triggering stop-loss orders and leading client trades, according to the documents.

They also gave code names to certain techniques, according to the documents, which explain that “lame” meant placing a series of small orders that are close to each other in terms of price, and “muscle” referred to placing large orders. – generally when they knew the market was illiquid.

On August 11, 2011, for example, a UBS trader wrote: “Don’t do anything now, it’s going to go fast like a roller coaster going up.”

“Dude, the 1 lot offer is so powerful I love it,” replied a Deutsche Bank trader.

“It depends on what you use muscle sometimes, sometimes you use a blade, it’s a blade, but two guys doing it like that together are a little muscle and a blade,” the UBS trader said.

‘The hammer’

Most of the talks involve a UBS trader known as “The Hammer,” who on April 1, 2011, wrote a post urging coordination of trades, according to records. “We have to do the same next time … if we’re right and doing it together, we fuck each other harder.”

A few months later, on June 8, “The Hammer” suggested a Deutsche Bank trader recruit new members to join the alleged plot, according to records. “We have to grow our mafia a bit to get a third position involved,” the UBS trader wrote. The Deutsche Bank trader replied, “Ok, I’m calling barx,” a reference to Barclays, according to the documents.

The recently aired conversations could rekindle concerns over the $ 30 billion a year global market for silver trading, which, due to its relatively small size and often volatile price swings, has long been suspected of ‘be rigged.

The US Commodity Futures Trading Commission launched an investigation into the manipulation of the silver market in 2008 amid an outcry from investors. Prices had collapsed at a time when many expected them to rise. The investigation was closed in 2013 and no charges were laid. At the same time, private plaintiffs and other authorities in the United States and Europe have investigated allegations of wrongdoing in the metals markets.

New auction

The London Fix was discontinued in 2014 after the withdrawal of Deutsche Bank. The new process involves an electronic auction-based mechanism for setting prices.

The documents also offer insight into the long-standing association between the Deutsche Bank trader and the trader who started at Fortis Bank. They maintained the same jokes and tactics for at least five years, even as banker Fortis moved to new banks, according to transcripts.

In total, the records show at least six exchanges between the two, agreeing to quote the same spread prices to clients and disclosing the respective market positions of their banks to each other.

‘Same wavelength’

In a conversation on April 4, 2011, they discussed setting up short positions against the silver market, while a month later they talked about maintaining bullish positions for a weekend. , according to records.

In a conversation in October 2011, they discussed the so-called spreads on buy and sell orders that they would quote to customers, according to records. Banks keep the difference between the two prices as a commission for negotiating the trade. “Thanks for the info mate… I’ll be online with you,” the Deutsche Bank trader wrote to the other then at HSBC.

In 2013, when the HSBC trader switched to Standard Chartered, they shared their respective positions and agreed where they would pivot in the market, according to the records. The Deutsche Bank trader said he would go short at $ 23.40. “We were on the same page,” the other replied.

At times, the two traders seemed to recognize that they had to keep their conversations off the platforms where they were recorded.

“Weird money solution,” the Deutsche trader wrote to the other then at HSBC on November 25, 2011. “I heard a funny story about the solution the other day,” the trader replied from HSBC. “But it’s definitely a beer talk.”

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