Articles tagged by Mark Johnson
Mark Johnson, the head of global FX cash trading at HSBC and
Stuart Scott, former head of FX cash trading for EMEA at HSBC, have been officially
charged by the US Justice Department with conspiring to defraud HSBC clients by
The US is to file for the extradition of HSBC’s former senior FX trader Stuart Scott from the UK to face charges under its broad wire fraud laws.
According to a report first published by Reuters the US Department of Justice has filed a letter in a in Federal court in New York, stating the US’ intention to initiate formal proceedings to seek Scott's extradition after learning he did not wish to come to the United States voluntarily to face the charges.
Documents lodged by the team representing HSBC’s former global head of FX trading, Mark Johnson, in his defence against market manipulation claims, indicate that should a defence case be needed it will focus on proving that the bank – and Johnson’s conduct – was in line with standard industry practice. Johnson and former head of EMEA FX trading Stuart Scott have been charged by the US Department of Justice with allegedly front running a large fix order from Cairn Energy.
Yet again as I find myself wondering about the timing of an official sanction. The Federal Reserve Board has fined HSBC for "unsafe and unsound" practices in its FX business, but in doing so has made an explicit link between the sanction and the ongoing trial of Mark Johnson in a US court. The Fed has "previous" for doing this of course, but last time the case in question was offshore and pending - this time it's happening down the road.
With apologies to those loyal readers who normally part with their hard-earned cash to read this column, today I am going to make it “free to air” – mainly because I feel there is a message that simply has to get out there regarding FX execution and liquidity.
If nothing else, the ongoing Mark Johnson trial in New York is highlighting how there are some seriously poor assumptions made in the wider world about how the FX market really operates.
George Bernard Shaw is widely attributed with the comment that the English and Americans are two peoples separated by a common language, but the fact is language can very easily take on a different meaning in print than was originally intended when it was spoken or typed. The FX industry has not been taking enough care over the language it uses in communications and that is bait for underperforming clients trying to make a few extra bucks and lawyers sensing an easy kill.
Mark Johnson, the head of global FX cash trading at HSBC, has been found guilty of eight counts of wire fraud and one conspiracy charge by a US court.
The jurors in the Eastern District Court of New York announced the decision on Monday.
They found Johnson guilty of defrauding Cairn Energy by using information provided in confidence to HSBC to about a $3.5 billion transaction to front-run the order and generate trading profits.
Johnson was arrested at JFK airport in New York in connection with this case in June 2016, as Profit & Loss reported at the time.
There are, predictably, plenty of headlines about nervous foreign exchange traders in the wake of the Mark Johnson verdict, many of them are justified because it could have deep ramifications for the industry.
We need to see the details of the conviction, however – specifically, was it based upon a lack of honesty with the client or does it reflect the US legal system’s view that pre-hedging is front running? Without that vitally important detail, we can’t judge the impact.
Just a few days after his former manager Mark Johnson was found guilty of wire fraud by a New York jury, HSBC’s former head of European FX trading, Stuart Scott, has failed in his efforts to block his extradition to the US to face similar charges.
Scott was charged by the US Justice Department, along with Johnson, of conspiring to defraud Cairn Energy with regard to a large sterling buy order for the firm in December 2011. Scott continues to deny he did anything wrong.
With a doff of the hat and the compliments of the season to those of you still chained to your desk this deep in December (and thus desperate enough for something to fill the day that you will read this), we come to the penultimate Irrational – and again, it’s quite competitive.
The Statement of the Year could be renamed the “Hmmm Award” because it is intended to highlight those things that people said that made your jaw drop and book an appointment at the Otolaryngologis.
Mark Johnson, the former head of global FX cash trading at HSBC in London, has been sentenced to two years in prison following his conviction for eight counts of wire fraud and one conspiracy charge by a US court in October last year. Johnson was also fined $300,000.
Profit & Loss has reported extensively on the case, and just pulling out a few of the headlines provides a fairly decent timeline for how the case has developed since Johnson was arrested in New York almost two years ago.
A few of you have been in touch to say you couldn't make the Insights call on Tuesday but were still keen to hear my thoughts on Mark Johnson being handed down a two year jail sentence. As flattering as it is to have people want my opinion on it, I really only want to go into brief details because firstly there are things better left said on an informal, off-the-record call, and secondly, you should have been on the call!
I have been reading through the application for bail lodged by Mark Johnson’s lawyers following his conviction and sentence to two years’ jail and not only do I think it previews his full appeal, but while I understand the job of the counsel is to make the best case they can by stretching facts to the limit, my natural reaction has also been that something went badly wrong during the trial for the verdict to be delivered the way it was.
In my column of November 11, 2013, I argued FX “needs a hero” – leadership to counter the negative narrative that surrounded the industry. Thanks to those that delivered the Global Code, we received that leadership, but the work is not done - in fact it is now more needed than ever, so it's time for today's leaders to step up and explain why pre-hedging is important. Along the way it will help Mark Johnson, but equally as important, it will help the entire industry.
Next Tuesday sees Mark Johnson’s bail application heard in New York and the documents filed by prosecution and defence are available online, which gives the wider world an opportunity to study both sides of the case through one prism. I've taken a look at both documents and, as someone with more than 40 years experience in this industry, it concerns me that a central plank of the prosecution's case is backed up by an obvious and fundamental lack of understanding as to how the FX market handles large risk.
Mark Johnson has won his bail application in the US Appeals Court and will been released subject to terms laid down by the District Court.
Three judges of the US Court of Appeals for the Second Circuit, granted the bail application Wednesday, which suggests that as well as seeing Johnson as no flight risk, they also believe there are credible legal issues surrounding the original conviction.
Johnson was found guilty of several counts of wire fraud and sentenced to two years in jail in an original decision that potentially has tremendous consequences for the FX industry.
In this week’s In the FICC of It podcast managing editor Colin Lambert and editor Galen Stops continue the tradition (yes, we know it’s three weeks in) of slamming a white paper from one of the world’s authorities.
To find out the winner of this week’s “obvious conclusion” prize, as well as hear their thoughts on Mark Johnson winning bail and Deutsche Bank’s fine for FX malpractice, download the podcast now.
Along the way you will also hear about a panel that was “moany”, they give a sneak peek of an exclusive story and, most importantly, they go truly off piste by giving their World Cup predictions!
HSBC’s former head of FX trading for Europe, Stuart Scott, has won his appeal against the decision to extradite him to the US to face trial over allegations that he took part in front running trading relating to an order for Cairn Energy.
Scott’s former boss, Mark Johnson, was convicted of charges related to the Cairn Energy deal in a US court last year and sentenced to two years in jail earlier this year, however he is appealing the decision and won a bail application in June.
It has been revealed that ACI – The Financial Markets Association (ACIFMA) is to draft an Amicus Brief, an expert submission on technical details, in defence of Mark Johnson, who is appealing his conviction in a US court for wire fraud relating to an FX hedging transaction for Cairn Energy. Johnson was sentenced to two years in jail following his conviction, but has since won an application for bail pending the appeal. Bruno Langfritz, chairman of ACIFMA talks to Profit & Loss about the Amicus Brief initiative.
In this column on June 7 2018 I wrote that the time had come for someone to show industry leadership when it comes to arguing the foreign exchange industry’s corner specifically around pre-hedging and Mark Johnson’s pending appeal. I looked particularly at the industry associations and, some believe, called them out on it. It is pleasing to see that there is a response from the industry, but it is not yet enough and more can be done - especially by one or two associations.
In this week's In the FICC of it podcast, Colin Lambert and Galen Stops discuss the Mark Johnson trial, pointing out that if the current verdict is upheld despite the ongoing appeal against it and ACIFMA's decision to file an amicus brief in support of the appeal, it could have a very significant impact on both the Global FX Code and how the FX industry operates more broadly. They also look at why crypto regulation is unlikely to move as fast as some people in the industry would like, and why this might not be such a bad thing.
ACI – The Financial Markets Association (ACI FMA) has filed an Amicus Brief on behalf of former HSBC FX trading head Mark Johnson, who is appealing his conviction and sentencing earlier this year for several wire fraud offences.
In the Amicus ACI says that if the US government’s “Illogical” position is allowed to stand, and the conviction is not overturned, bank dealers are unlikely to operate in the face of potential criminal sanctions simply for transparently and fairly hedging the uncompensated risk of “colossal loss” to their shareholders.
A second Amicus Brief filed in the Mark Johnson appeal stresses the risks associated with providing FX services to clients around the Fix and argues that pre-hedging is intrinsic to handling orders at the mechanism.
The Amicus from Professor Torben Andersen, the Nathan S. and Mary P. Sharp Professor of Finance at the Kellogg School of Management at Northwestern University says that without the ability to pre-hedge, dealers would have no economic incentive to trade as principals with customers at the Fix.
“When dealers trade as principals at the Fix, they typically pre-hedge their trades by executing a number of smaller transactions before the Fix time,” the Amicus states.
And so, dear readers, we commence the second 500 of these columns by returning to a theme that has dominated the past 100 – and which remains the biggest single issue facing the foreign exchange industry at this time. I refer of course, ...
I quite like reading academic papers on the FX market structure – often they state the obvious, but just as often they get the hamster back on the wheel in my head.
An interesting paper on spoofing and pinging in OTC FX markets was released recently, which does a great job of highlighting why platforms need to be on top of behaviour; how some LPs are nothing of the sort and how others’ behaviour could be confused with spoofing but shouldn’t be. The paper also provides support for my argument that Mark Johnson’s conviction should be over-turned.