The news this week that the US government has failed to prosecute another FX trader is yet another indication of both the eagerness of the authorities there to have a “head” to represent the general misconduct of bankers, as well as those same authorities’ lack of understanding as to how the FX market works. In this case, as well as that of Mark Johnson, there is more than enough evidence to indicate the “customer” knew perfectly well how the FX market operates and therefore were most definitely not “victims”.
In this Profit & Loss exclusive, Rohan Ramchandani, who was recently acquitted of FX market manipulation by a jury in New York, breaks his silence on the case and gives his perspective on why he believes the prosecution’s arguments were fundamentally flawed.Cast your mind back to 2008. Lehman Brothers collapsed, the financial crisis ensued, causing a global recession, which in turn led to unemployment climbing and house prices falling. People lost their homes. There was public outrage at what happened, aimed primarily at global “bankers” though few understood exactly what role individuals had played. Nonetheless, in the following months, one question in particular recurred in the press, namely “who is being held accountable?” This was to prove the start of a multi-year “anti-banker” campaign provoking regulators and prosecutors to go hunting for blood.
There’s something for everyone in this week’s In the FICC of It podcast as Colin Lambert and Galen Stops traverse the US legal system, trading, crypto and China.
Listen in as Lambert explains why he is mystified at the prosecution’s flip-flop in the Mark Johnson case and angry at the FX industry’s previous lack of effort to explain how markets work to the US legal authorities; and Stops takes a look at a new report n his favourite industry – CTAs. Having had the data explained to him, Lambert also thinks he knows why some CTA sectors are doing well and some aren’t, so that’s another of his “theories” then…
Our podcasters then move onto debate whether crypto markets will evolve to an OTC model and whether this would be a good thing for attracting institutional money to what is still a relatively nascent market.
Stops closes out by reporting from an analysts’ briefing this week that highlighted a change in approach on the part of China to its programme of liberalisation of the yuan.
I have previously argued that the FX industry needs to pay attention to the outcome of the Mark Johnson trial. Reading through the appeal documents, however, indicates the stakes have been raised. The prosecution’s original case was, in my opinion, flawed when looking at how the FX market works, but the new charges take this to a new level and they throw into a harsher light the reluctance of certain trade associations to engage and educate the US authorities earlier in this case – we can only hope it is not too late.
Shortly after we published the news that Richard Usher, Rohan Ramchandani and Chris Ashton, the three members of the now notorious “Cartel” chat room, were found not guilty of FX market manipulation by a New York court last Friday, my phone started buzzing.
Lots of the activity was WhatsApp messages and phone calls from various industry sources wanting to chime in regarding the decision, and one thing that has been interesting in the intervening time is that my sources seem to be split about whether they’re surprised regarding the outcome of the case.
“I know that they only release choice bits of the chat room transcripts to the public, but what came out looked pretty damning to me. I’m surprised that they’ve been able to get out of this one,” opines one market source.
The US Commodity Futures Trading Commission (CFTC) has issued an Order filing and settling charges against Kamaldeep Gandhi, in which Gandhi admits to engaging in manipulative and deceptive schemes, along with other individuals, which involved thousands of acts of spoofing with respect to a variety of futures products traded on the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and the Commodity Exchange (Comex).
At the same time the US Department of Justice (DoJ) charged Gandhi and two alleged co-conspiritors, Bruce Mao and Krishna Mohan, with spoofing offenses and says Gandhi and Mohan have admitted to the charges.
Profit & Loss’s latest OnTheBlock series featured a one-one-one discussion with former CFTC staffer Justin Slaughter, now a partner at Mercury Strategies, in which he provided an insider’s perspective on how cryptoassets are being viewed by regulators in Washington, DC.
P&L OnTheBlock: An SEC official recently said that the agency does not view ether[eum] as a security. Does this mean that the issue is settled and the SEC definitely won’t try and regulate it as a security now?
Justin Slaughter: What we are basically hearing is that there isn’t an explicit, major problem with ether as a security. They are not yet saying it’s totally, absolutely, not a security.
Speaking at Profit & Loss Forex Network New York, Mike Gill, chief of staff to US Commodity Futures Trading Commission (CFTC) chairman, Christopher Giancarlo, and the CFTC’s COO, provided a fascinating look at how attitudes towards cryptocurrencies have changed in Washington recently.
Gill revealed that the CFTC received significant criticism within the walls of government last year for its approach to cryptocurrencies, such as bitcoin, which the agency allowed two exchange groups to list futures on at the end of last year.
The reason for this criticism, he said, was concerns about money laundering and illicit activity linked to bitcoin and other cryptocurrencies.
The US Department of Justice has announced it has brought an inductment against former JP Morgan EM FX trader Akshay Aiyer for his role in alleged FX market manipulation. Aiyer is specifically charged with conspiring to fix prices and rig bids and offers in Central and Eastern European, Middle Eastern, and African (CEEMEA) currencies.
According to the indictment, from at least as early as October 2010 through at least July 2013, Aiyer, along with other New York-based CEEMEA traders working for rival banks, participated in a conspiracy designed to suppress competition in order to increase each trader’s profits and decrease each trader’s losses.
There’s a lot of noise about the latest front running accusations in FX world, with people talking excitedly about a fundamental change in how the market operates, but it strikes me that the changes these people talk about have already happened. Does any one really carry risk any more? Aren’t targets expressed not in P&L terms but in fees generated and market share (which is itself a quasi fee)? Nothing is going to change – including the lawyers getting rich at the industry’s expense!