Barometer of Fear
Page 30
Lukes, Steven, 186
makers, price, 24
Malaysia, financial crisis, 36
Mankell, Henning, 235
‘marked to market’ trading books, 62
market, the financial: ‘colour’ 202; ‘conventions’, 228–33; ‘courtroom’, 171; interbank spread choosing ‘image’, 229; liquidity risk, 42–3; making, see below; perfections of, 15; relationships dependent, 225–6; risks limits management failure, 281
market makers/making, 24, 72, 117, 201, 206, 217, 226–7, 257; ‘ability’, 185; cash-settled derivatives, 133; failure to manage, 281; NIBOR IRS, 132; profession of, 200; two-way price quoting, 228; visibility of, 202
Martin Brokers, 85
Mathew, Jonathan, 139
McAdams, Richard, 231
McDermott, Tracey, 282
Meitan Tradition, 100, 175
Merita Bank, 56
Merrill Lynch, 2–3, 8–9, 12, 46, 49, 59–60, 62, 64, 69, 92–3, 96, 140, 153, 155, 160–1, 164, 188, 272, 285; Bank of America takeover, 67; bonuses, 10, 162–3; financial centre, 48; International Bank Limited Dublin, 4; mismarking, 68; risk taking encouraged, 281; silence rule, 242
Midland Montagu (Midland Bank Stockholm Branch), 20, 22–3, 27, 29; Stockholm, 22, 29
‘Millenium bug’ fears, LIBOR impact, 44
mismarking, 9
mistakes, fear of, 26
Mollenkamp, Carrick, 98
‘monetary transmission mechanism’, 39
money market(s): decentralised, 224; freeze, 110; international basis, 112; ‘risk premium’, 42; stable illusion-making, 106; -state link, 224
Moody’s, 96
morals, 66; morality, 69
Morgan Stanley, 49, 193, 223, 272
mortgage bonds, 21
NASDAQ stock exchange, transparency, 220
New York 2001 attacks, 263
New York Times, 4, 9, 11, 163, 241, 243
NIBOR (Norwegian Interbank Offered Rate), 28, 72, 130–1; fixing dates, 76; inaccurate fixing, 74; IRS market, 132; new unpredictability, 62; one month IRS market, 136
nicknames, use of, 25–6
Nordbanken, nationalised, 27
Nordic bank branches, 30
Norges Bank, NIBOR use, 152
Norinchukin Bank, 153
Northern Rock, Newcastle queues, 109
Norway, banking system, 131
‘objective’ fact, LIBOR, 149
‘off-balance-sheet’, trading, 137–8
official interest rate, predicting, 38
OIS (overnight index swap), 51; see also LIBOR-OIS
one month IRS market, 136
OPEC (Organization of the Petroleum Exporting Countries), US dollar surpluses, 113
options desk, FX, 214
‘over-the-counter’ trades, 63 derivatives, 129, 134; interest rate options, 130; markets, 227
Philippines, financial crisis, 37
Philips, cassette launch, 111
PIBOR (Paris Interbank Offered Rate), 19, 127
post scandals, reforms, 282
price(s), as interactions, 200; brokers indications role, 87; ‘resolution hypothesis’, 218
primary dealers, 175, 178
privacy, individual rights to, 167
Rabobank, LIBOR fine, 83, 153, 282
RBC, bank, 223
RBS, bank, 92, 153, 185, 188, 192, 220–1, 223, 284; LIBOR scandal fine, 83
reciprocity: -and trust, 226, 284; informal agreements, 228
regret, fear of, 258
regulatory arbitrage: Eurodollar market prompting, 118; platform for, 114
‘reputation’, 185
respect, among traders, 267
Reuters, 19, 79, 151; Dealing, 41, 195, 260; Dealing 2000–2, 29, 34, 194; indicative prices, 62; screen price, 53
risk, 135; buzz of, 261–2; limits breaking, 274; ‘loss aversion’, 255; managers, 253; organizational limits, 250; pressures for, 63
risk taking: addictive, 262; enjoyment of, 260; fear control, 263; increase, 73; individualistic, 262; reward anticipation, 254; reward interpretation, 259; supervision need, 253
risk takers, 270; respect among, 268–9
Robert, Alain, 260
‘rogue traders’, 1, 237; ‘bad apples’ narrative, 237, 240, 246, 279; fame, 252; fascination with, 246; losses, 259; ranking list, 250; risk list, 251; scandals, 258; stigma, 247
rogue trading, 274; definitions, 249; labelling, 248; risk link, 250
Royal Bank of Canada, 153
RP Martins, 153
rules of the game, loyalty to, 25
‘run-throughs’, 87–9, 226–7
Russia, financial crisis, 36
Ryan, Ian, 3, 9, 68
Sanford C. Bernstein & Company, 10
Sanwa Bank, 34
Scandanavia: banking crisis, 31, 47; derivatives market, 27
secrets, 157, 170; bank employee clauses, 156, 158; value of, 157
self-confidence, hubristic sense of, 261
‘self-detection’, 213
Service Employees International Union, USA, 163
SFO, 13
Sherman Anti-Trust Act, 220
short-term maturities, trading, 145
short-termism, 279
SIMEX (Singapore International Monetary Exchange), 127
Simmel, George, 157
skydivers, studies on, 268
Smith, Adam, 234
Smithfield market, London, 48
Snapchat, monitoring difficulty, 283
‘snipers’, hardened traders, 66
Snow, Jon, 11; blog of, 247
SOAS (School of Oriental and African Studies), 6–7, 168
social norms, fear of retaliation, 231
Societé Générale, 194, 223
‘sophisticated traders’, financial crisis impact on, 276
Soros, George, 32
South Korea, financial crisis, 36
Spandau Ballet, Gold, 188
‘spoofing’, 204
Standard & Poor’s, 96
Standard Chartered, 223
Stenfors, Alexis: accusation distress, 245; childhood coins interest, 64–5; father of, 57–8; FCA five year ban, 244; FSA Final Notice, 249; guilt feelings, 69; media coverage distress, 11, 247; mismarking episode 280; press coverage, 242; silencing of, 12; threats against, 243
Stern, Andy, 163
STIBOR (Stockholm Interbank Offered Rate), 28, 76, 79; new unpredictability, 62
Stiglitz, Joseph, 225
STIRT (Short-term Interest Rate Trading) desk, 30, 40, 52, 140, 215
stock markets, benchmarks, 149
Stockholm School of Economics, 20
stop-loss order, 205–9; 258
Story, Louise, 9
Strange, Susan, ‘casino capitalism’, 171
Suez War outbreak of, 113
supply and demand, FX information, 207
swap desk, FX, 214
Swedbank, 23
Sweden, 32; banking crisis, 20; central bank, 116–17; fixed-income market, 22; FX market, 176, 178; T-bills, official rule book, 230
Swiss franc, 44; derivatives market, market makers cartel, 221
Swiss National Bank, 151
syndicated loans market, LIBOR prompting, 117–19
T-bills, 21, 230; pricing, 23
‘take-profit orders’, 206–8
takers, market/price, 24
Telerate, LIBOR rate updating, 19
Term Auction Facility, Federal Reserve, 51
Thailand, financial crisis, 37
Thain, John, 164
Thatcher, Margaret, ‘Big Bang’, 115
TIBOR (Tokyo Interbank Offered Rate), 14, 76, 78–9, 127, 130; new unpredictability of, 62; yen, 81
TIBOR-LIBOR spread, 81, 127; ‘barometer of fear’ gauge, 36; Japanese Christmas party, 101
TIFFE (Tokyo International Financial Futures Exchange), 127
Tokyo-Mitsubishi Bank, 34
‘Tomnext’, contracts, 145
tomorrow rate bets, LIBOR,
146
Totan brokerage, 101
trade tickets, 24; ‘Benchmark’ detail, 19; details on, 18
traders: biases, 203; bonds and FX, 27; bonuses, 56; brokers blackmailing, 90; constant observation of, 26; ‘feel’, 32; ‘profit centres’, 95; respect among, 267; risk takers, 257, 260; sloppy mistakes, 253; stereotypical perceptions of, 240
trades, 79; client prioritised, 19; speed of, 29
trading: books, 2; buzz addiction, 271; competitive, 267; computer speed, 273; principles erosion, 67; proprietary, 257; risk level, 62; risk taking, 280; rules social norms, 65; secrets, 167; ‘styles’, 47
transparency, LIBOR lack, 79
trimming process, 7, 79, 81–2
Tullett Prebon brokerage, 101, 175
Turner, Adair, 124
‘two-way price’ making, 116
UBS bank, 92–3, 101, 153, 188, 192–3, 210, 213, 220–1, 223; bad apple narrative, 214, 236; FX scandal press release, 232; LIBOR scandal fine, 82; rogue trading scandal, 168
UK (United Kingdom): Consumer Price Index, 123; EU referendum pound fall, 171; Prudential Regulation Authority, 279; taxpayers RBS rescue, 83; Treasury, 222
University of Cologne, 17
University of Iowa, 237
USA: corporations innovative borrowing, 112; Reserve, 44–5, 50–1, 163, 174, 176, 225, 265; SEC, 180; sub-prime mortgage market, 49
US dollars, 44; demand for, 98; growing pool abroad, 112; LIBOR, 45
US dollar: LIBOR panel, 82; Middle East Europe placing, 113; trading in, 30
USSR (Union of Soviet Socialist Republics), Banque pour l’Europe du Nord, 113
Wall Street, 236, 250
Wall Street Journal 182
‘wash trades’, 91–2, 94, 96
Weber, Axel, 213
Wheatley, Martin, 188
Whitehouse, Mark, 98
Wilson, Paul, 238–9
Winter War, USSR-Finland, 65
WM/Reuters 4pm fix, 208, 212, 277
World Trade Center Attacks, New York, 45, 264–6
yen, 33
‘Your Amount’, trader call, 143–4
Zacher, Linda, 153
ABOUT THE AUTHOR
Alexis Stenfors spent 15 years as a foreign exchange and interest rate derivatives trader at HSBC, Citi, Crédit Agricole and Merrill Lynch. In 2009, he found himself at the centre of a ‘mismarking’ scandal that would eventually result in him being described as one of the ‘world’s most infamous rogue traders’. Returning to academia the same year, he completed his doctoral thesis with the title ‘Determining the LIBOR: A Study of Power and Deception’ in 2013. Alexis holds a civilekonom degree and an MSc in financial economics from the Stockholm School of Economics, a CEMS master’s degree from the Community of European Management Schools, and a PhD in economics from SOAS, University of London. He is currently senior lecturer in economics and finance at Portsmouth Business School.